1031 Tax Exchanges

What Is a 1031 Exchange?

You've just sold a piece of investment real estate and, either through depreciation deductions on the property or through an appreciation in value, you now have capital gains tax to pay. Capital gains can be as high as 25%. Section 1031 of the Internal Revenue Code is one of the last great tax shelters. A 1031 Exchange allows you to defer payment of taxes due. As the name suggests, the 1031 Exchange works through the "exchange" of property. As long as you trade up in value and debt, your taxes will be completely deferred. By deferring these taxes, the wise investor is able to

• Increase Cash Flow
• Purchase Different Property
• Diversify Property
• Consolidate Property

For instance, you might sell vacant land, which is not yet producing income, to buy a commercial building which is bringing in rent.

There are a few important rules that you must follow in order to meet the guidelines for a 1031 exchange. As a Certified Exchange Specialist, we can help you complete your exchange smoothly and within the regulations set forth by the IRS.