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1031 Real Estate Trading Sees Explosive Growth

The use of barter—non-cash trading—goes far beyond the commercial barter industry. Another example of the enormous numbers through the use of barter in one such sector is the phenomenal expansion of real estate exchanges. According to a Deloitte study the use of tax-deferred 1031 transactions in 2003 totaled $210 billion, more than double the $86 billion in 2001.

A “1031 exchange” comes about when a taxpayer takes the following actions: Within 45 days of selling a property he/she must identify the new one they intend to buy. Then within 180 days of sale they must close on the new asset.

In the meantime a middleman holds the cash. The tax break isn’t available for a person’s residence or a second, country home. But it does cover the sale of a house an owner rents out, commercial real estate, business jets, factories and more.