A 1031 exchange, named after Section 1031 of the Internal Revenue Code, allows real estate investors to defer capital gains taxes by reinvesting the proceeds from a property sale into another qualifying investment property. The investor must identify replacement properties within 45 days and close within 180 days of the sale. A qualified intermediary must hold the funds during the exchange period. This powerful tool lets investors trade up to larger or better-performing properties while preserving capital that would otherwise go to taxes. Careful planning around timelines and property identification rules is essential for a successful exchange.