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Section 1031
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- 11921 Tax Rule Lets Landlords Defer Capital Gains Forever●A 1921 Rule Called Section 1031 Lets Landlords Swap One Building for Another Forever and Never Pay Capital Gains. Then They Die, and the Bill Disappears for Good
A provision of the US tax code known as Section 1031, dating from 1921, allows real estate investors to sell one property and buy another without ever paying capital gains tax, deferring the bill indefinitely. When the owner dies, heirs receive the property with a stepped-up basis, wiping out the deferred tax entirely. Critics argue the provision amounts to a permanent tax break for wealthy landlords, while defenders call it a pillar of real estate investment.