The IRS recently issued guidelines that will help taxpayers determine whether a transfer of an undivided fractional interest in rented real estate will be eligible for a tax-free exchange under Section 1031 of the Internal Revenue Code.
What does all of this mean and how will it help real estate owners? To understand the significance of these guidelines, one must understand a little background about the significance of the tax-free exchange rules under which the IRS operates. Section 1031 permits taxpayers to avoid recognition of income when property, used in a trade or business or held for investment, is transferred in exchange for “like kind” property. It is one of the few big breaks in the tax code for owners of real estate.
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