Benefits
of the 1031 Like Kind Exchange
Just
to review, a 1031 exchange is simply a method by which a real
property owner disposes of one property and acquires another
without having to pay any capital gains tax on the transaction.
In an ordinary sale transaction, the property owner is taxed
on any gain realized by the sale.
A properly
structured exchange allows you the investor to sell a property,
to reinvest the proceeds in a new property and to defer all
capital gain taxes. And this is possibly the most important
benefit of investigating the 1031 Like Kind Exchange transaction,
your ability to defer potentially taxable gain you may realize
from a sale of the property.
This way
you may be able to use all of your equity to acquire another
property, instead of the amount of equity left over after paying
applicable Federal and State income taxes on your gain.
Not only
do exchanges protect investors from capital gain taxes, they
facilitate significant portfolio growth and increased return
on investment. In order to access the full potential of these
benefits, it is crucial to have a comprehensive knowledge of
the exchange process and the IRC. For instance, an accurate
understanding of the key term "Like Kind" –
(which we discussed in the previous article) often mistakenly
thought to mean the same exact types of property - can reveal
possibilities that might have been dismissed or overlooked.
Another benefit of the 1031 Exchange
or 1031 Like Kind Exchange is your ability to go from one type of property to another, This flexibility
allows you to use leverage, diversification, cash flow, consolidation, management relief, and possibly
increased depreciation.
It
is possible, under the current IRC Section 1031 rules, to continue
to exchange properties, using all of your equity, thus increasing
your portfolio Net Worth MUCH FASTER than were you to sell properties,
pay the taxes, and then acquire another property with the remaining
equity.
ASK
janeAnne about 1031 Exchanges
