With the growing home prices of current years, a growing number of people are finding themselves facing a big tax obligation bill when they come to sell their investment residential or commercial properties. Nevertheless, did you realize that there is a perfectly legal means of deferring repayment of such tax obligations by using the advantageous 1031 tax code that was presented by the Internal Revenue Service in the early 1990s? A Section 1031 exchange is a way of deferring payment of capital gains tax on certain kinds of real estate. Usually when a financial investment or service property is sold, capital gains tax needs to be paid. Nevertheless, with 1031 exchanges, by replacing the old residential property with a like-kind home, within set time limits, payment of funding gains tax can be avoided. Under the 1031 exchange realty policies, a seller needs to have held a residential property for a minimum of one year and a day for it to qualify. An additional demand is that both old (given up) and also brand-new (replacement) 1031 exchange buildings should be of a like-kind - either rental residential properties, uninhabited land, profession, financial investment or service homes.