Finance
A New York City commercial property is being purchased using a '1031 exchange' (like-kind exchange). The purpose is to:
AAvoid local transfer taxes
BDefer capital gains taxes by exchanging one investment property for another qualifying property✓ Correct
CConvert rental income to capital gains
DTransfer title without recording fees
Explanation
A 1031 exchange (under IRC section 1031) allows a real estate investor to defer federal capital gains taxes when selling an investment property, provided the proceeds are reinvested in a like-kind replacement property within specified time limits (45 days to identify, 180 days to close). The exchange does not avoid taxes permanently — it defers them.
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