Tax Deferred 1031 Exchange Explained


Tax Deferred 1031 Exchange Explained

A tax-deferred exchange is a method by which a property owner trades one or more relinquished real estate properties for one or more replacement real estate properties of like-kind, while deferring the payment of federal income taxes and some state taxes on the transaction. In turn, IRS 1031 tax code provides that no gain or loss shall be recognized on the exchange of commercial property held for productive use in a trade or business. By deferring any applicable taxes, the property owner has more money available to invest in other commercial property. In effect, you receive an interest free loan from the federal government in the amount you would have paid in taxes.

When combined with a tax deferred 1031 exchange, tenant in common (tic) real estate properties can be even more attractive. Tax Deferred 1031 Exchanges allow you to defer capital gains taxes by investing in a like commercial property. When using tenant in common (tic) real estate properties with a tax deferred 1031 exchange, you can defer capital gains while diversifying your investments. You can purchase shares of various tenant in common (tic) real estate properties in different locales with the proceeds of the 1031 sale.

If you are considering the sale of an investment commercial property, contact a specialist today to discuss your tax deferred 1031 exchange options.

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