Like-Kind Exchange (Section 1031)

Definition

A like-kind exchange allows a taxpayer to defer capital gains taxes when selling investment or business property by reinvesting the proceeds into a similar qualifying property under IRC Section 1031. The IRS requires strict adherence to identification and closing deadlines — 45 days to identify replacement property and 180 days to close — and any misstep can trigger immediate recognition of the deferred gain. CPAs managing these transactions must coordinate with a qualified intermediary, track boot exposure, and file Form 8824 to report the exchange.