A tax-free exchange is another tax treatment that results when a real estate investor trades equity in one property for equity in a similar property.

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A tax-free exchange, also known as a 1031 exchange, allows a real estate investor to defer paying taxes on the realized gain from the sale of an investment property by using the proceeds to purchase a similar property. This exchange can only be for like-kind properties and must follow specific IRS guidelines.

A Tax-Free Exchange Is Another Tax Treatment That Results When