Whenever a business or investment property is sold and the seller makes a financial gain, they generally have to pay tax on the gain at the time of sale.  However, IRC Section 1031 provides an exception and allows the seller to postpone paying tax on the gain if they reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.