Real Estate Glossary

What's an Exchange?

In real estate, an exchange refers to the process of trading one property for another. This is commonly done as a tax-deferred transaction under Internal Revenue Code Section 1031, which allows investors to exchange real estate properties without paying taxes on the appreciation of the properties. This type of exchange is known as a 1031 exchange or a like-kind exchange. The property being sold is called the "relinquished property" and the property being acquired is called the "replacement property". It's important to follow the specific rules set by the IRS and to have the proper guidance of a qualified intermediary to ensure that the exchange is done in compliance with the regulations.