Deferred gain refers to the amount of gain that is realized but not recognized at the time of a transaction, commonly occurring in tax-deferred exchanges, often known as 1031 exchanges. Essentially, deferred gain allows taxpayers to defer paying taxes on capital gains by reinvesting the proceeds in like-kind properties.
Under Section 1031 of the Internal Revenue Code, like-kind property used in a trade or business or held as an investment can be exchanged tax-free.
A Gain in real estate refers to an increase in the value or selling price of a property compared to its purchase price. This can result in a financial profit for the property owner.
A realized gain refers to the financial gain generated from the sale or exchange of a property, though this gain may not always be subject to immediate taxation. In cases of tax-free exchanges, such as under Section 1031, the gain is realized but not recognized for tax purposes.
Recognized gain is the portion of a realized gain that is subject to taxation in a so-called tax-free exchange, such as under the IRS Section 1031 rule.
