Section 1031 Exchange Explained

Section 1031 Exchange Explained

Internal Revenue Code allows a real estate investor of investment commercial real estate to exchange commercial real estate and defer paying federal and state capital gain taxes (20%+ applicable state taxes) in the event that they purchase a like-kind commercial real estate. A tax-deferred exchange is a method by which a real estate investor trades one or more relinquished commercial real estate for one or more replacement commercial real estate of like-kind, while deferring the payment of federal income taxes and some state taxes on the transaction. By deferring any applicable taxes, the real estate investor has more money available to invest in other commercial real estate. In effect, you receive an interest free loan from the federal government in the amount you would have paid in taxes.

When combined with a section 1031 exchange, tenancy in common commercial real estate can be even more attractive. Section 1031 Exchanges allow you to defer capital gains taxes by investing in a like commercial real estate. When using tenancy in common commercial real estate with a section 1031 exchange, you can defer capital gains while diversifying your investments. You can purchase shares of various tenancy in common commercial real estate in different locales with the proceeds of the 1031 sale.

If you are considering the sale of an investment commercial real estate, contact a specialist today to discuss your section 1031 exchange options.



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