Broker Check

Swap Til You Drop: Defer Capital Gains with a 1031 Exchange

January 20, 2016
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Here's a very broad summary of what a 1031 exchange is: it’s a swap of one piece of business or investment real estate for another. Although most swaps are taxable as sales, if you exchange within IRS 1031 guidelines, you have no tax due at the time of the exchange.  

Of course there are special rules, contact us or read more about them here.

Some have called it “swap ‘till you drop” for getting the most out of a 1031 exchange. Often times investors don’t sell their replacement property, they exchange it, and continue the tax deferral by exchanging again and again. This way many taxpayers enter into a series of exchanges, completed over many decades, and even until death to get a step-up in their cost basis for their heirs -- “swap till you drop”.

Here are three reasons to consider a 1031 Exchange today:

  1. Deferral of tax on capital gains
    • The owner can earn income on the taxes saved and also eliminate paying the high-rate taxes on the recapture of depreciation taken on property as well.
  2. Relieve the burden of active real estate ownership and property management
    • Exchanging for a passive investment that alleviates owner stress.
  3. Improve tax-advantage cash flow and appreciation potential
    • A replacement investment that generates a higher operating income increases the money flowing back to the owner.

Find out more reasons for a 1031 Exchange and learn about restructuring and simplifying your real estate portfolio.

Contact us to get started today!


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