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.
