A 1031 exchange is ALMOST a free lunch. But it’s not really free of capital gains taxes. It is a way to defer them.Specifically, a 1031 exchange is a transaction in which a taxpayer owning property held for investment or for use in a trade or business, sells the property and uses the proceeds to acquire replacement property. The tax basis in the relinquished property is carried over to the replacement property.Capital gains deferred!If that property is ever sold and not exchanged the gain existing at the time of sale and any additional gain will be recognized and taxed. If exchanged property is held through the taxpayer’s life the basis is stepped up to fair market value at death and those gains are never taxed. Want to defer Capital Gains taxes? Contact Nancy Grekin.