According to an interesting article in today’s WSJ article “A real estate speculator’s surprise,” many real estate investors don’t understand the proper use of [1031 exchanges [Note: Pd. Sub.]](http://online.wsj.com/article_print/0,,SB112665806460739921,00.html)
A person who sells real estate can defer capital gains obligations by rolling their gains into a similar piece of property. Also called a [like-kind exchange.](http://www.1031safeharbor.net/Glossary.htm)
The problem is that many investors are flipping their properties so frequently, especially in certain markets like Miami and Las Vegas, that the IRS can interpret their activity as a business, and therefore subject to other taxes. This could catch many of these investors by surprise, especially if the boom cools and the margins on flips evaporates.
Tags: 1031 Exchange
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