A 1031 exchange allows investors to defer capital gains taxes when selling an investment property by reinvesting the proceeds into a new property of equal or greater value within specific time frames. It is authorized by Section 1031 of the IRS code and has requirements that must be followed, such as identifying a replacement property and completing the exchange, in order to qualify for tax-deferred treatment. Using a 1031 exchange expert is recommended because the process can be complex.