1031 Exchange Basics
“The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital… the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy.”
–John F. Kennedy
WHAT IS A 1031 EXCHANGE?
A 1031 Exchange allows investors to reinvest their equity and defer capital gains tax on any exchange of like-kind properties for business or investment purposes. Its name stems from section 1031 of the U.S. Internal Revenue Service Code, which stipulates that capital gains taxes are not due on the sale of a property if all of the money from the sale is used to purchase a qualifying property.
When a 1031 Exchange is successfully completed, capital gains tax is deferred until the property is sold for profit without any re-investment.
The logic behind this exemption is relatively straightforward. In simple terms, if a real estate owner sells one property in order to reinvest the entire proceeds of the sale in another property, technically there has been no gain. The owner has simply transferred the value of the property to another location. Because there are no capital gains (money) pocketed by the seller, no taxes are due on the 1031 Exchange.
WHO SHOULD CONSIDER A 1031 EXCHANGE?
A 1031 Exchange represents an excellent opportunity for any real estate owner or investor who is interested in acquiring a replacement property to reinvest his equity.
When a property is sold or transferred for gain or profit, it can be subject to taxation. Depending on the circumstances surrounding the sale, these taxes can be crippling to property owners looking to reinvest in another property. A 1031 Exchange provides a mechanism for property owners to re-invest all of the property’s equity into another asset. Whether you are a small business looking to move to a more profitable location, a large corporation looking to rapidly expand, or a private investor trying to build wealth for future generations, a 1031 Exchange enables you to accomplish your investment goals without having severe capital gains taxes levied against you.
With a 1031 Exchange, you have the power to transfer all of your hard-earned equity into a new or better property.
HOW DO I EXECUTE A 1031 EXCHANGE?
A 1031 Exchange empowers investors to transfer their hard-earned equity into bigger and better properties. However, the strict regulations and deadlines involved in 1031 Exchanges requires a thorough understanding of how they should be structured and executed. At 1031 Equity Exchange, LLC, we partner with you at every step of the process, from identifying a qualifying replacement property for purchase to successfully executing the exchange.
If you are interested in learning more about 1031 Exchanges, or if you believe you are ready to make your first investment, please contact us for more information about the current opportunities available for new investors. If you are already a seasoned investor, please click here for more information about joining our network.