Which exchange is noted as a tax-deferred circumstance?

A tax-deferred exchange is a transaction that allows an investor to defer paying taxes on the profit from the sale of an investment property, as long as the proceeds are reinvested into another like-kind property. This type of exchange falls under Section 1031 of the Internal Revenue Code, which is specifically designed to defer capital gains taxes when certain conditions are met.

In a tax-deferred exchange, the investor must exchange an investment property for another investment property of equal or greater value, and it must be a like-kind property. This enables the investor to postpone tax liability and can significantly enhance their investment capacity by allowing more capital to be reinvested rather than being paid as taxes.

The other options do not accurately describe this specific mechanism. A standard exchange refers generally to exchanges without specific tax advantages. A time-limited exchange may imply time constraints but does not inherently provide tax deferral benefits. A cash exchange typically involves receiving cash proceeds from a sale, which does not qualify for tax deferral under the 1031 exchange rules. Thus, the tax-deferred exchange is uniquely positioned to enable investors to leverage their assets without immediate tax consequences.