A Minnesota investor uses a 1031 exchange to sell a property for $650,000 (original cost $400,000) and purchase a replacement property. The gain deferred in the exchange is:

Explanation

Deferred gain = Sale price - Original cost basis = $650,000 - $400,000 = $250,000. In a 1031 exchange, this $250,000 gain is deferred (not forgiven). The new property takes on a 'substituted basis' that preserves the deferred gain for future taxation. Minnesota investors use 1031 exchanges to defer significant capital gains taxes while reinvesting in larger properties.