What Is IRS Form 1031 Used For?


Quick Answer

Taxpayers use Internal Revenue Service form 1031 to report like-kind exchanges of property and investments. Taxpayers typically use this form and its provisions to defer paying capital gains taxes, Forbes notes. Once individuals finally owe the taxes, they can take advantage of favorable long-term capital gains rates.

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Full Answer

An example of a transaction reported on form 1031 is the exchange of one commercial building for another. A taxpayer can sell one building and close on another one within 180 days, then use form 1031 to report the transactions as a like-kind exchange. Form 1031 provisions primarily apply to investment and business properties, not primary homes, Forbes advises. However, some types of personal property, such as artwork, qualify for form 1031.

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