I am chasing in some property and getting a large capital gains back. One of my friends told me that if I reinvested it back into real estate then that portion would not be taxed. Is this true?

Not if you have already SOLD the property.

What your friend is referring to is a 1031 like-kind exchange. That allows you to sell one property, put the money is escrow, then use the money to purchase another, larger property or multiple other properties and NOT pay capital gains on the transactions.

It is a complicated process that MUST be done correctly. There are real estate firms that specialize in such like-kind exchanges.

You sell the property, you must report the sale. By investing it, you do not get any tax benefit. If it is your home property, you may exclude gain of up to $250,000.

If you owned your main home for two years and lived for two years in past five years, then you can exclude gain of up to $250,000. Read: Your U.S. Tax Return: Profit From the Sale of Your Home

Thanks for the answers guys, this helps a lot and lets me know that my friends don't know squat... lol.

Glad to help!