1031 Exchange part 3

Real Estate Agent with Keller Williams Miami Beach

Why would I want to be involved in an Exchange?
Do you own "management intensive" Real Estate? Or perhaps you own property you purchased or inherited years ago and would prefer another property. You have probably realized good returns on investment that will otherwise be lost to the IRS. The sale of every property is a potential tax event with the tax consequence being realized after the closing of the property. Section 1031 was written into the Internal Revenue Code in the 1920's. The IRS realizes that your investment in Real Estate spurs the economy onward, however upon the sale of the property, any profit realized from appreciation must be reported, and is taxed at 20%. The depreciation you have been enjoying will be taxed at 25%. If you own passive investment property (raw land for example) you may have enough profit to invest to generate a cash flow by purchasing an income producing property.

Comments (2)

Dorothy Zink

Anyone selling any kind of investment property and planning to purchase other investment property should be interested in exchanging.  

To clarify, it does not  eliminate the tax consequences; rather, it allows you to defer them, so you can invest the money that would have gone to taxes in building your empire.

You can buy a better replacement property that may produce more income, and need less of a loan to acquire it, increasing profitability.

Sep 11, 2012 07:38 AM
Maureen Bray Portland OR Home Stager ~ Room Solutions Staging
Room Solutions Staging, Portland OR - Portland, OR
"Staging Consultations that Sell Portland Homes"

Thank you for the great education. I learned so much from your post.

Oct 11, 2012 06:30 AM