What is a 1031 Exchange?
The
Internal Revenue Code Section 1031 allows for what
is known as a “1031 Exchange” which is a method by
which a property owner exchanges one or more
relinquished properties for one or more replacement
properties of "like-kind", while deferring the
recognition of the capital gains and other taxes on
the transaction. Although there are several
variations of a 1031 Exchange, the most common and
practical application of the 1031 Exchange is what
is also known as a 1031 Starker Exchange.
The 1031 Exchange is a tax deferred strategy that
accomplishes 100% deferral of capital gains
indefinitely. By using a 1031 Exchange for the
deferral of capital gains taxes, you are able to
preserve the value of your real estate which enables
you to secure more lucrative properties. This
process of trading up and preservation are part of
the wealth building cycle for real estate investors
and wealth builders.
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