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Section 1031 Exchange Advantages

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Advantages and Disadvantages of 1031 Exchange

The Internal Revenue Code of the United States declares, under Section 1031, that the exchange of specific types of real estate property may defer due taxes applied on regular capital gains. If you represent a business that holds as asset one real estate property which, if sold for cash, would cause profit loss, this 1031 tax-deferred Exchange should definitely be on your option list. The most practical usage of the 1031 Exchange is to defer capital gain or loss upon a real estate sale, if this approach suits your current situation. The simplest, most straight forward guideline of the 1031 Exchange is that the real estate properties destined to personal usage do not fall under its incidence. This Section of the Internal Revenue Code mostly applies to businesses, as the properties to be exchanged must be owned (held) for specific productive, business purposes by a company. Initially, the 1031 Exchange (the ownership …show more content…

This approach helps you sell your investment property and reinvest in a different real estate asset, without suffering through market depreciation. This priceless, exceptional tax-deferral exception allowed by the IRS, should do wonders helping a realtor, who is building a real estate portfolio or who is struggling in a rough market, reinvest and survive without owing money to the state.

Increased cash flow should also be one main advantage of the 1031 Exchange. Exchanging properties, without passing through all the associated taxes you would pay if you sold for cash, can indeed be very lucrative.
Maximizing the return of a real estate investment should also not be something treated lightly and the 1031 Exchange facilitates exactly that. Imagine exchanging real estate properties without having to pay taxes until the market is favorable and you can finally sell for cash and not lose a cent, if this is your final

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