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| Why Exchange? |
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| Tax-free growth of your real property investment is the tremendous advantage provided by a 1031 exchange. |
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| A 1031 exchange allows you to: |
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Legally Avoid Capital Gains Taxes and Use All of Your Profits as You Step Up and Expand Your Real Property Ownership. |
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Effectively Stabilize and Increase Your Stream of Income. |
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Decrease Your Property Management Expenses and Time Commitment. |
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| If you sell a property that has appreciated in value, you will be required to pay capital gains tax on the difference between what the property cost you and what you get for it now, plus recapture of any depreciation you have previously taken. If your property has substantially appreciated in market value, you will be required to pay a substantial amount of capital gains taxes and depreciation recapture to the government. |
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A 1031 exchange allows you to legally avoid paying these taxes. 1031 exchanges – if done properly – have the special benefit, unlike other forms of real property transactions, of allowing the complete legal avoidance of capital gains taxes and recapture of depreciation.
The entire value of the assets can be reinvested – with 100% of your investment working for you. |
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| In fact, in an exchange under Section 1031, instead of paying money to the government, you will be getting what amounts to an interest-free loan from the government. If your financial goals include investing in real estate, increasing your wealth, and improving your income stream, a tax-free 1031 exchange may be the best thing you can do with your real property. |
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There are several additional reasons why you might want to engage in a 1031 exchange. You might want to consolidate your real property holdings and exchange several smaller properties for one larger property. Conversely, you might want to diversify your real property holdings or plan to eventually divide your estate among several children by exchanging one larger property for several smaller properties. A 1031 exchange will let you consolidate or expand your real property holdings without paying capital gains taxes.
You might want to exchange a property that is appreciating slowly for a property with a faster potential for appreciation. Or you might want to exchange a property that has been fully depreciated for a property that can continue to be depreciated. You can use a 1031 exchange to make these changes in your real property without paying capital gains taxes.
You might also want to exchange property because of a change in your location. If, for example, you have moved to another state (or want to move), you might then also want to relocate your investment property holdings. Or you might want to exchange an investment or rental property for one that you can use in your own profession. A 1031 exchange will allow you to relocate your real property holdings or change the character of your holdings without paying capital gains taxes. |
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| The benefits of a 1031 exchange include: |
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You never have to pay taxes on the transfer of real property. |
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You will be able to use all of your investment to move up to more productive and stable income-producing property – property that increases your stream of income while decreasing your property management expenses, maintenance headaches, and time commitment. |
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Instead of paying money to the government, you will be getting what amounts to an interest-free loan from the government. |
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Using a Section 1031 exchange to transfer your property investment to ownership of a tenancy-in-common (TIC) can maximize the benefits of real property ownership while providing relief from many of its most troublesome headaches and uncertainties. Because tenancies in-common are typically managed by professional management companies, you will no longer have to deal with the problems of collecting rent, avoiding vacancies, negotiating leases, demands for repairs and other tenant complaints, or with delinquencies and evictions. You will also have the freedom to live wherever you want – or at least take a vacation – without having to worry about the maintenance and management of your real estate investment. |
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| If your financial goals include investing in real estate, increasing your wealth, and improving your income stream, a 1031 exchange allows you to do so while legally avoiding capital gains taxes and the recapture of depreciation. |
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