A properly structured 1031 exchange allows for an investor to sell a property, and reinvest the proceeds (capital gains) into a new property and to defer all capital gain taxes. IRC Section 1031 (a)(1) states:
“No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment, if such real property is exchanged solely for real property of like-kind which is to be held either for productive use in a trade or business or for investment.”
The following example will help you understand the powerful reasons why a 1031 exchange offers incredible tax benefits and capital protection -- consider the following example:
- You buy and sell an investment property and make $200,000 in profit. Once you sell that property, the government can tax the profit ($200,000) from the sale 15-35%. You can defer paying taxes if you roll all the proceeds and profit into another investment property.
These are major advantages why working with a partner that supports the 1031 Exchange program and we can help you learn more to leverage these powerful protections. We are here to educate you on utilizing real estate in a smarter way.