In the normal course of events, when you sell real property and realize a gain on the investment, you are subject to capital gains taxes. For example, if you purchased a property for $100,000 and later sell it for $150,000, you may be required to pay capital gains taxes on the $50,000 gained as a result of the sale. The Internal Revenue Code, Section 1031, however, allows certain transactions to qualify for a deferral of the payment of capital gains taxes. In order for a transaction to qualify for a 1031 exchange, you must purchase “like-kind” property to replace the property you sold. Under certain circumstances, you may be able to purchase the replacement property first by using a reverse 1031 exchange.