A 1031 Tax Deferred Exchange allows a seller of investment property, in provision with Internal Revenue Code Section 1031, to defer paying capital gains tax on their investment properties.
The following is a summary of typical 1031 exchange:

Seller assigns interest in Real Estate Purchase Contract to an a facilitator of the 1031 Exchange and pays facilitator fee

Sale proceeds are delivered to facilitator at closing and are deposited by facilitator into an interest bearing escrow account

Within 45 days of the date of the sale, Seller must designate in writing to facilitator other like-kind property as “Exchange Property” for purchase (Seller may identify up to 3 properties)

Purchase of Exchange Property must close within 180 days of the date of sale

Seller delivers any shortfall in the purchase funds to facilitator

Facilitator disburses the funds in the escrow account to Title Company to purchase the Exchange Property

Any excess funds are disbursed to the Seller and are subject to tax