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1031 Exchange Explained


1031 Exchange Explained

A tax-deferred exchange is a method by which a property owner 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. In turn, IRC section 1031 provides that no gain or loss shall be recognized on the exchange of investment property held for productive use in a trade or business. 1031 Exchange is one of the best possible strategies for deferring the capital gains that would ordinarily arise from the sale of investment property. It provides property owners with greater leverage, increased diversification, improved cash flow, increased potential for geographic relocation and potential investment property consolidation.

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