1031 Exchange Explained




1031 Exchange Explained

A tax-deferred exchange is a method by which a real estate investor 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, section 1031 provides that no gain or loss shall be recognized on the exchange of commercial property held for productive use in a trade or business. 1031 Exchange is one of the best possible strategies for deferring the capital gains that would ordinarily arise from the sale of commercial property. It provides real estate investors with greater leverage, increased diversification, improved cash flow, increased potential for geographic relocation and potential commercial property consolidation.

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