When the minimum federal tax on capital gains from a property sale was reduced last year from 20% to 15%, experts speculated that investors would be tempted to cash in their assets, and that 1031 activity would dip. Not so, says accommodator McCabe. “Few are saying, ‘I'm going to go ahead and take a hit.’ It's tax free as long as you're playing the game, and most people have stayed in.

“For most of us, it's a retirement type of income stream, just like a 401(k) or IRA,” McCabe continues. “It's the idea you're moving up the food chain. You start with a duplex, move on to a four-plex and eight-plex, you get your depreciation out, and then work your way up to a 40-unit complex.”

Russell Brenner, managing director of Chicago-based Syndicated Equities Corp., a real estate investment firm specializing in 1031 exchanges, says all the new blood in the 1031 arena has more than compensated for the few who've cashed in. “Even in light of the capital-gains tax cut, we have still seen a tremendous surge in activity, in part because of all the press and publicity surrounding 1031s.”

John McDermott, national director of office and industrial properties for Irvine, Calif.-based brokerage and investment firm Sperry Van Ness, says the company has “seen the (1031 exchange) pie get bigger and bigger with each passing day. We're seeing second and third transactions for the same clients. Like the stock market, values will go up, but unlike the stock market, they won't go away.”