The 1031 Tax Exchange Rule refers to the trading of property that is considered to be “like kind” in nature. While a typical sale and its resultant gain leads to the seller being taxed by the government, the sale of like-kind property does not. At least, not initially.
The government considers (through the IRS 1031 tax exchange rule) the exchange to be an equal swapping of an investment. While the property itself is different since it has changed hands, the actual investment value is the same. One example for a like-kind exchange is the transfer of five acres of hunting ground for a five-acre farming plot.