1031 Exchange Explained

It is the IRS approved method that enables you to sell your investment property investment property and reinvest in another investment property or investment properties, deferring all federal (and most state) capital gains taxes. This transaction is authorized by IRC section 1031 and is one of the best options for property owners to rollover their investment investment properties while preserving as much wealth as possible. The theory behind IRC section 1031 is that when a property owner has reinvested the sale proceeds into another investment property, the economic gain has not been realized in a way that generates funds to pay any tax. In other words, the taxpayer’s investment is still the same, only the form has changed (e. g. vacant land exchanged for apartment building). Therefore, it would be unfair to force the taxpayer to pay tax on a paper gain.

Contact a specialist today for a more thorough explanation and for advice relating to your personal circumstances.