Section 1031 of the U.S. Internal Revenue Code allows investors to defer capital gains taxes on the exchange of like-kind properties. 1031, or tax-deferred, exchanges hold great advantages for investors. 

1  Real Property Use

Both, your old and new property must qualify as investment or business use.  If both properties pass this test, you can exchange nearly any type of real estate.

2  45 Days Identification Period

You have 45 days from the closing of your sale to list the properties you may want to buy.  There are no exceptions to this deadline.

3  180 Days Exchange Period

From the sale closing date, you have 180 days to close on the purchase of one or more properties from the 45-day identification list.  There are no exceptions to this deadline.

4  Qualified Intermediary

The IRS mandates that you use a Qualified Intermediary to provide your exchange.  Because the Qualified Intermediary must be independent, it cannot be your friend, employee, accountant, broker or attorney.  The Qualified Intermediary holds your money, so that you do not have access to it.

5 Proper Title Holding

You must purchase and take title to your new property exactly as you held title to your old property.

6  Reinvestment Requirement

To defer all of your capital gain tax, you must buy a property equal or higher in value than the one you sold.  Also, you must reinvest all of the cash proceeds from your sale.

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Note: This is neither legal nor tax advice.  Please consult your tax attorney or CPA to discuss your individual case.  Investors should conduct their own independent investigations and rely only on those results.