1031 Tax Deferred Exchange :
What is a 1031 Tax Deferred Exhange?
Section 1031 of the Internal Revenue Code (IRC) offers real estate buyers a golden opportunity by means of significant tax advantage. It allows real estate buyers the chance to defer the capital gain taxes that they incur by selling a property. It states, a real property owner can sell his property and then reinvest the proceeds to purchase of “like-kind” property and defer the capital gain taxes.
Why do a 1031 Tax Deferred Exchange?
- It’s a powerful wealth building tool
- Any gain from depreciation recapture is postponed.
- One of the few techniques available to postpone or potentially eliminate taxes
- You can acquire and dispose of properties to reallocate your investment portfolio without paying tax on any gain.
- By deferring the tax, you have more money available to invest in another property. In effect, you receive an interest free loan from the federal government, in the amount you would have paid in taxes.