What is a 1031 Exchange?
For over 100 years, taxpayers have successfully used the tax code to defer tax liabilities that would otherwise be created when selling investment property. The opportunity still remains available for investors today, allowing more of your capital to remain at work in a productive capacity through a 1031 exchange.
When selling your replacement property in an exchange, you defer both capital gains and depreciation recapture taxes. Any proceeds not used in purchasing a replacement property will be taxable.
Why conduct a 1031 Exchange?
Investors strategically use 1031 exchanges for any number of reasons, including:
- tax deferral (up to 35-40% of gains)
- estate planning
- building & preserving wealth
- diversifying or consolidating a real estate portfolio
- maximizing cash flow
- transitioning to passive ownership
- expanding into other real estate markets or property types
Taxpayers conducting an exchange must purchase 'like-kind' real estate, meaning the property is used for investment. This allows investors to match dollar for dollar in the exchange, not property for property. Examples of 'like-kind' include:
- commercial properties
- office space
- Delaware Statutory Trusts
- mineral rights
- long-term leases
Contact Us Today!
Your exchange must be in place prior to the sale of your investment property. Contact us today to begin the conversation