An entire lifetime of gain goes untaxed. A less obvious, but equally compelling, advantage is the effect of leverage. An investor may want to defer tax because he will not realize sufficient cash from the sale transaction. The investor may have refinanced and not have enough equity to pay the tax owed. In addition, investors take tax write-offs in the form of depreciation.
Depreciation saves money on today's taxes but reduces the owner's basis in the property.
Basis is the term used to describe where you start to calculate taxable profit. The seller owes tax on the difference between the reduced basis and the sale price. Using a tax deferred exchange allows the investor to postpone paying. The basis in property sold transfers to the new property. If you buy a new property adding money, those additional funds add to the basis.