Internal Revenue Code (IRC) 1031(a)(1) states that
“No gain or loss shall be recognized on the exchange of property held for
productive use in a trade or business or for investment if such property is exchanged
solely for property of like-kind which is to be held for productive use in a trade
or business or for investment.”
The theory behind this ruling is that the investment itself is not changing; just
the form of the investment changes. Since the investment itself has not changed
and “no gain shall be recognized,” no tax should be paid.
Iowa Equity Exchange, Qualified Intermediary, exists to help the investor deal with
the obstacles that must be overcome to qualify for tax-deferred treatment.