Some smaller real-estate investors are turning away from a popular tax-deferral strategy that has attracted scrutiny after fraud allegations.
A number of investors had already started to reject the option out of concern about another problem: high prices for commercial properties.
The so-called 1031 exchange strategy allows participants to defer, or sometimes avoid, paying capital-gains taxes when they sell a business or investment property if they plan to buy another property of equal or greater value. To qualify for the benefit, the seller can’t touch the money from the sale. Instead, the money typically is received and held by a “qualified intermediary”