1031 Exchange Explained
IRC §1031 states the following:
"No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment."
Simply put, a 1031 exchange allows an investor to defer payment of capital gains taxes while maintaining exposure to real estate.
A 1031 exchange allows an investor to take a capital gain from the sale of a property and invest, or “exchange” the proceeds into another, generally larger, property thereby allowing the investor to defer payment of capital gains tax.
Though the basic premise of a 1031 exchange is simple, there are details that can be confusing. For example, one of the key phrases in IRC §1031, “like-kind” is often mistaken to mean the same exact types of properties. An experienced professional with comprehensive knowledge of the 1031 exchange process and the Internal Revenue code will answer questions such as these and will help guide you through the entire process.
What are the advantages of a 1031 exchange?
- A properly structured 1031 exchange allows an investor to sell a property and then reinvest the proceeds in a new property and defer all capital gain taxes.
- With a 1031 Tenants-In-Common (TIC) investment, you have the opportunity to own an interest, or undivided share in an institutional quality property, including commercial, retail, multi-family and industrial real estate.
- A Tenant-in-Common (TIC) property investment relieves investors of the day to day burdens of property management.
If you are considering the sale of an appreciated investment property, we urge you to learn more about this important and powerful investment tax deferred investment technique. We are experts in the IRS Code 1031 Exchange and are closely involved in finding properties which will allow you to trade-up to larger investment properties while deferring payment of capital gains tax.
If you would like to learn more about 1031 exchanges you can contact us or attend an educational seminar hosted by Rich Giglio. These 1031 seminars are held throughout the country and explain many options of real estate purchases and investments.
For more information, please contact us.
Nothing in this website should be deemed to constitute tax, legal or accounting advice. Investors are urged to consult their own tax advisors.