1031 Exchange Explained
1031 Exchange Explained
A
1031 exchange permits
1031 real estate real estate investors to sell a
real estate and defer tax payments by reinvesting the proceeds into a like-kind
1031 real estate or real estate. A
1031 exchange is enabled by IRS section 1031.
The theory behind IRS section 1031 is that when a
real estate investor has reinvested the sale proceeds into another real estate, 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.