When one trades equity in one property for equity in a similar property without receiving cash,he or she pays

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This type of exchange is known as a like-kind exchange or a 1031 exchange. It allows the taxpayer to defer paying any capital gains taxes on the exchange, as long as the properties are of similar nature and use. The taxes will only become due when the taxpayer eventually sells the property they received in the exchange. Therefore, there are no income taxes owed in the year of the exchange itself.

When One Trades Equity in One Property for Equity in a Similar