1031 Exchange Explained

IRC Section 1031 allows a property owner of investment property to exchange investment property and defer paying federal and state capital gain taxes (20%+ applicable state taxes) in the event that they purchase a like-kind investment property. A tax-deferred exchange is a method by which a property owners trades one or more relinquished investment properties for one or more replacement investment properties of like-kind, while deferring the payment of federal income taxes and some state taxes on the transaction.

Completing a 1031 exchange with a tenants in common interest ownership in an investment property allows property owners not only to defer their capital gains taxes, but to also upgrade their investment property into larger, institutional-grade investment properties. Essentially, 1031 exchanges allow property owners to use all of the proceeds from their sale as leverage to gain access to more valuable investment property.

If you are thinking of transferring any investment property, contact us today for more information on 1031 exchanges. A 1031 exchange permits 1031 exchange property property owners to sell an investment property and defer tax payments by reinvesting the proceeds into a like-kind 1031 exchange property or investment properties. A tenants in common is a form of ownership that permits participants to enjoy the rewards of investment property ownership without participating in the ongoing management of an investment property. A tenants in common exchange yields an inherent interest in investment property and offers several benefits as a qualified 1031 exchange.

Performing a 1031 exchange allows property owners to use all of the proceeds from the initial sale of investment property as leverage for entering into more lucrative investment property deals. The advantages of entering into a tenants in common are increased cash flow and diversified investment portfolios while deferring capital gains taxes at the same time.

If you recently sold an investment property or you're considering selling a current investment property, we can match you with a TIC advisor that can assist you in facilitating the exchange process.