Right now, everyone is thinking about taxes and tax-related issues. Some folks even have capital gains to consider as they make investment moves. But did you know that there is a way to take those capital gains and roll them into another asset at the same time, with the option of paying NO TAXES at all? It exists, and is called a 1031 Tax-Deferred Exchange. You can learn more about such transactions by checking the website of the 1031 Exchange Alliance.

Here’s how it works. Section 1031 of the Internal Revenue Code provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment. Now what this means is that you have to make that capital gain and put that money back into a similar asset in such a way that you do not accrue an immediate cash profit to yourself. In effect, you are deferring taxes by making the exchange of the same sort of assets. So, for example, you could make tax-deferred exchange of one rental property for another, possibly by “buying up” into a better neighborhood or class of property, or by increasing the number of such holdings you have with the gain you made on the sale of the old asset. In effect, you increase your investment without needing to pay a large tax bill or plow in a lot of additional capital.

Posted by: Greg at 09:53 PM | No Comments | Add Comment
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