Section 1031 of the U.S. tax code allows people who have capital gains from real estate sales to defer tax exposure on those profits. To do so, they must use those profits to purchase a similar property within 180 days of the original sale, and they can never touch the money themselves. This process is known as a 1031 title exchange. For obvious reasons, they are popular with real estate investors.
The law exists to encourage investors to put their money back into circulation instead of just putting their profits in a bank, where only the investor benefits. That’s why you’re allowed to do 1031 exchanges as many times as you like. However, the key element is that you can’t physically touch any of the profits. If you put them in your bank for even one day, the profits are subject to taxation.
