1031 exchanges are utilized by many taxpayers to defer capital gains taxes when selling real property. But many people think of the 1031 exchange as some sort of tax loophole and that those who perform 1031 exchanges are somehow “gaming” the system. In this article, we will talk about whether or not like-kind exchanges of real estate should be considered tax loopholes.
The short answer is no – 1031 exchanges of real estate are not tax loopholes. Section 1031 has been a part of the Internal Revenue Code for many decades. It was established by Congress to encourage investment and stimulate economic growth. Instead of paying capital gains taxes when selling real estate, 1031 exchanges allow taxpayers to defer those taxes as long as they move their gains into new like-kind property.
A loophole implies that something is sneaky or underhanded in some way. That is not true of 1031 exchanges at all. 1031 exchanges are perfectly legal and above board. You could even say that like-kind exchanges are encouraged by the US government. They give taxpayers an incentive to continue investing in real estate and moving money around the market – thus stimulating growth.
Like-Kind Real Estate Exchanges in MN
At Commercial Partners Exchange Company, we work with clients in Minnesota and across the country. Our primary goal with each client is to help defer capital gains taxes on the sale of real estate via section 1031 of the Internal Revenue Code. With decades of experience, our 1031 intermediaries are well versed in the exchange process, and can answer any of your questions. Contact us today to discuss your situation and whether a 1031 exchange is right for you. Our primary office is located in Minneapolis, but we work with clients in all fifty states.