For people that have investment real estate that they’d like to sell, a 1031 exchange can be a very valuable tax strategy. Here’s why.
How it Works
Here’s how it works – you sell investment real property. You dispose of each of those properties as part of a 1031 exchange and line up new acquisitions – new properties that are like-kind within the 45 day or 180 day exchange period.
The idea is that every disposition of a piece of real estate is a 1031 relinquished property and that gets matched up with every acquisition of a replacement property.
The benefits are that you get to keep the time value of that money that would otherwise go out the door in unnecessary taxes and keep that capital working in your business so that you can expand and grow your business.
So delay the recognition of gains as much as possible by incorporating a program or plan that every disposition is a tax-deferred 1031 sale, and every acquisition is the completion of a 1031 exchange. By doing this, owners of investment real estate can maximize the tax efficiency of their operation and have more money to expand and grow their business.