About The 1031 Exchange
WHY EXCHANGE INSTEAD OF SELLING?
The simple answer is tax avoidance. Since 1921, Internal Revenue Code 1031 has sanctioned tax-deferred exchanges of investment and business properties. A qualified tax-deferred trade up is viewed, taxwise, as one continuous investment.
There are at least 10 reasons for exchanging realty:
(1) pyramid your investment equity without tax erosion of your sale profit;
(2) minimize or eliminate the need for new mortgage financing on the property acquired;
(3) get rid of an undesirable property that is difficult to sell and acquire a better property;
(4) increase the your depreciable basis;
(5) acquire a property which better meets your needs, such as more cash flow or easier management;
(6) partially defer profit tax by trading down to a smaller property that suits the owner's needs;
(7) avoidance of depreciation recapture tax when selling a property;
(8) refinance either before or after the trade to take out tax-free cash;
(9) accept an unexpected purchase offer to sell a currently-owned property without owing tax; and
(10) completely avoid capital gains tax by still owning the last property in a chain of tax-deferred trades.
Note: Like kind exchanges are often complicated. A failure to follow the rules may disallow your exchange. Please check with your attorney or investment/financial professional.
The simple answer is tax avoidance. Since 1921, Internal Revenue Code 1031 has sanctioned tax-deferred exchanges of investment and business properties. A qualified tax-deferred trade up is viewed, taxwise, as one continuous investment.
There are at least 10 reasons for exchanging realty:
(1) pyramid your investment equity without tax erosion of your sale profit;
(2) minimize or eliminate the need for new mortgage financing on the property acquired;
(3) get rid of an undesirable property that is difficult to sell and acquire a better property;
(4) increase the your depreciable basis;
(5) acquire a property which better meets your needs, such as more cash flow or easier management;
(6) partially defer profit tax by trading down to a smaller property that suits the owner's needs;
(7) avoidance of depreciation recapture tax when selling a property;
(8) refinance either before or after the trade to take out tax-free cash;
(9) accept an unexpected purchase offer to sell a currently-owned property without owing tax; and
(10) completely avoid capital gains tax by still owning the last property in a chain of tax-deferred trades.
Note: Like kind exchanges are often complicated. A failure to follow the rules may disallow your exchange. Please check with your attorney or investment/financial professional.
- 1031 FAQs
From the Federation of Exchange Accommodators
- Expert1031
Info on doing exchanges
- Asset Preservation, Inc.
1031 Exchange information
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All California Brokerage, Inc.
11245 183rd Street, PMB 247 • Cerritos, CA 90703
Phone: (562) 896-2609 •
Site Map | E-Mail
All California Brokerage, Inc.
11245 183rd Street, PMB 247 • Cerritos, CA 90703
Phone: (562) 896-2609 •