If a taxpayer reinvests the net proceeds (amount received minus related expenses) received in an involuntary conversion in qualifying replacement property within the statutory time period, it is possible to defer the recognition of the realized gain.

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This is known as the "like-kind exchange" or "1031 exchange" rule in the tax code. By reinvesting the net proceeds in qualifying replacement property within 45 days after the date of the conversion, and then acquiring the replacement property within 180 days after the date of the conversion, the taxpayer can defer recognition of the realized gain.

If a Taxpayer Reinvests the Net Proceeds (Amount Received Minus