In the United States, a taxpayer normally incurs a capital gains tax obligation upon the sale of property if the taxpayer realizes a gain as a result of the sale. Because the capital gains tax rate is typically high taxpayers look for ways to reduce, or eliminate, paying capital gains taxes. One option is to enter into a Section 1031 Exchange transaction in lieu of a traditional sale. For transactions that qualify, any capital gains tax that would otherwise be incurred is deferred.