Is §1031 a tax "loop-hole"...?

Is §1031 a tax "loop-hole?"...?

Typically, when most people hear the term “tax loop-hole,” they think that something sneaky is going on. And, although, the “loop-hole” may technically be legal, the resulting tax treatment is not what Congress or the IRS intended.

This is absolutely NOT the case with §1031 Tax-Deferred Exchanges. §1031 is a section within the U.S. Tax Code passed by the U.S. Congress. Originally, Congress allowed exchanges around 1920, and the law has undergone numerous changes over the years to achieve its current form as §1031. Therefore, Congress clearly wanted taxpayers to be able to exchange assets (primarily real estate) and save money on taxes. §1031 is likely on the books because Congress wants taxpayers to have an incentive to keep businesses and personal investments growing without the burden of paying taxes along the way – it’s good for the economy.

Congress knew what it was doing when it passed §1031. So, it is not a tax “loop-hole” at all. Rather, it is a wonderful tax benefit that taxpayers should take advantage of.

--The Experts