What is a 1031 Exchange and Why Should I know about it as a Real Estate Investor?
The Tax deferred exchange is offering investors one of the last great opportunities to build wealth and save on taxes as defined in section 1031 of the Internal Revenue Code of 1986 as amended offers investors one of the last great opportunities to build wealth and save on taxes. By completing an exchange the investor (exchanger) can dispose of their investment property, use all of the equity to acquire replacement investment property of equal or greater value, defer the capital gains tax that would ordinarily be paid, and leverage all of their equity into the replacement property. Two requirements must be met to defer capital gain tax: (a) the exchanger must acquire “like Kind” replacement property and (b) the exchanger cannot receive cash or other benefits (Unless the exchanger pays capital gains taxes on the money).
What Are Some Non Tax Reasons to Exchange?
Exchange to fit lifestyle of a client. for example, exchanging investment property or several properties to one larger property consolidating the benefits of ownership , reducing management responsibilities and allowing more time to travel.
Exchange from property that cannot be refinanced. For example, moving from vacant land to improved property, which can support a new refinance loan, and will thereby give the client the ability to obtain cash after the acquisition of the replacement property.
Exchange from non-income producing raw land to improved property to create positive cash flow from the rental income.
Exchange from property with maximized or minimal cash flow (an apartment building) to a higher cash flow property (a retail shopping center) to generate a larger cash flow.
Exchange for a property or properties that may be easier to sell in the years to come.
Exchange to meet the client location requirements. for example a client moves to another state and wants their investment property near by for management purposes.
Exchange to diversify and minimize risk to your real estate portfolio. for example, exchange from residential to commercial real estate or exchange into property located in other regions of the united states.
Click to Contact James Rasmussen and the Rasmussen team today to learn more about the 1031 exchange and how to initiate an exchange if you are located in The Eastside, Bellevue or Seattle area today!
By James Rasmussen
Posted on June 11, 2013 at 7:38 am by James Rasmussen