Understanding Basis and Gain

A 1031 Exchange does not require you to replace the full value of the relinquished property, but you cannot do so without tax liability on the portion you did not replace, whether this be debt, depreciation recapture or equity. The intrinsic value of a 1031 exchange is directly related to the amount of deferred gain, thus potential tax, that is offset in the exchange with the purchase of a replacement property. View additional information.