A 1031 tax-deferred property exchange is a method by which a real property owner disposes of one property and acquires another without having to pay any capital gains tax on the transaction. A triple-net lease is one in which the tenant pays all of the ongoing operating expenses.
In 1921 the first 1031 exchange laws were enacted. The theory was that if one does not cash out of an investment, the economic gain has not been realized in a way that produces the cash to pay the tax, and therefore taxes should be deferred.
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