1031 Exchange

A 1031 exchange, named for that section of the tax code, lets real estate investors defer capital gains tax when they sell an investment property and reinvest the proceeds into another like-kind property. Instead of paying tax on the gain at sale, the tax is postponed as long as the money keeps rolling into qualifying investment real estate. The rules are strict: you generally must identify the replacement property within 45 days, close within 180 days, and use a qualified intermediary to hold the funds so you never take direct possession of the cash. This tool applies to investment and business property, not your personal home. Because the timing and structure are unforgiving, work with a tax advisor and intermediary before you sell. See selling a multi-family in RI.