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Most people who invest in real estate or own property used for business purposes are concerned with the tax ramifications involved in the sale of their properties. 

If you are one of these people, or if you are considering investing in real estate, you should know about the Internal Revenue Service provision for exchanging one real estate investment for another. You can also hire professional 1031 exchange attorney to get the best real estate solutions.

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The real estate transaction is referred to as a 1031 Tax Deferred Exchange, and it can help real estate investors increase their assets while deferring taxes.

The benefits of a 1031 Tax-Deferred Exchange are obvious as compared with the outright sale of an investment property. With proper planning, an investor can continue to exchange properties for those of greater value. 

What is the purpose of a 1031 exchange?

A tax-deferred 1031 exchange allows you to roll-over all amounts received from the sale of investment property into the purchase of one or more other investment properties as well. At the close, the results are transferred to a third party – the so-called facilitator or intermediary quality that holds them until they get to use the new property.

Exchanges Allow You to Delay Capital Gains Taxes

Capital gains taxes are deferred if all of the exchange funds are used to purchase a like-kind investment property. The deferment is like getting an interest-free loan on the tax dollars you would have owed for a cash sale. 

Know More About 1031 Exchanges