Broadly speaking a 1031 exchange (also called a Starker) is a swap of one investment property for another. Although most swaps are taxable as sales, if yours meets the requirements of 1031, you'll either have no tax or limited tax due at the time of the exchange.

The biggest advantages of the 1031 simply explained is Depreciation Recapture, and the Delayed Gain.

In effect, you can change the form of your investment without (as the IRS sees it) cashing out or recognizing a capital gain. That allows your investment to continue to grow tax-deferred. There's no limit on how many times or how frequently you can do 1031. You can roll over the gain from one piece of investment real estate to another to another and another. Although you may have a profit on each swap, you avoid tax until you sell for cash many years later. Then you'll hopefully pay only one tax, and that at a long-term capital gain rate some time down the track. There are also ways you can use 1031 for swapping vacation homes—more on that later—but this loophole is much narrower than it used to be.