1031 Exchange Explained




1031 Exchange Explained

The IRS section 1031 or 1031 exchange is an effective tax deferral strategy available to taxpayers. This code allows for a rollover of equity of like properties, through a 1031 exchange, to take place without requiring the payment of capital gains taxes on the initial investment. The theory behind IRS section 1031 is that when an owner has reinvested the sale proceeds into another property, the economic gain has not been realized in a way that generates funds to pay any tax. In other words, the taxpayer's investment is still the same, only the form has changed (e. g. vacant land exchanged for apartment building). Therefore, it would be unfair to force the taxpayer to pay tax on a paper gain.

Contact a specialist today for a more thorough explanation and for advice relating to your personal circumstances.


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