What amount can be deferred under IRC Section 1031 according to the exchange rules?

Under IRC Section 1031, also known as the like-kind exchange provision, the correct interpretation is that the entire gain on exchanged properties can be deferred. This section of the Internal Revenue Code allows taxpayers to defer paying capital gains taxes on properties when they sell an asset and reinvest the proceeds in a similar property as part of a qualifying exchange.

When properly executed, Section 1031 enables individuals and businesses to swap real estate holdings without immediate tax implications on the gain realized from the sale. This allows investors to leverage their equity in real estate without the burden of tax payments until such a time that the property is sold outside of the 1031 exchange.

For this reason, the correct answer is that the entire gain can be deferred, as it aligns with the intent and provisions laid out in the tax law regarding like-kind exchanges. Other options suggest limitations or specific amounts for deferral, which do not accurately reflect the benefit provided under Section 1031.