A 1031 Exchange Means you can Invest More

A 1031 exchange for rental and investment real estate is a tool that allows investors to move  the gain from one property to another without immediate income tax consequences.

An instant benefit is to postpone the tax due which gives the investor a larger amount of proceeds to invest.  In the example shown, the investor has 21% more proceeds to invest and grow over time than if he had paid the taxes due instead of exchanging.

1031 Exchange Means You Can Invest MoreA legitimate long-term goal might be to make qualified exchanges from one property to another until the investor dies.  The heirs would then receive a stepped-up basis on the property based on the market value at the time of the decedent’s death and possibly avoiding taxes altogether.

There are specific requirements to be met in order for the exchange to qualify. For more information on exchanges, see IRS publication 544.  In addition to enlisting the services of a real estate professional familiar with investment property, seek the help of Qualified Intermediary to facilitate the intricacies of the exchange.  Your real estate agent can help you locate one.

One thing you should alway do is to discuss any  1031 Exchange with your Tax advisor.  If you need help with a 1031 Exchange then our team of awesome licensed agents are here to serve you.

Leave a Reply