With a large population of baby boomers reaching retirement age it becomes extremely important to plan and take advantage of all the tax-saving strategies that are available. Most investors think about the immediate tax benefits of completing a 1031 exchange but may not consider the additional long-term benefits of the tax deferral. An exchange provides the opportunity to apply pre-tax dollars towards replacement property and put that money to work.
Knowing some basic rules behind Internal Revenue Code 1031 can help investors defer paying capital gain tax on property dispositions, resulting in more money to invest in new property acquisition. Generally, any real property can be exchanged, provided it is held “for productive use in a trade or business” or for “investment” and is exchanged for property of “like-kind” that will also be held for one of these same purposes.
All real property is like-kind to other real property. For example, you can trade an apartment building for an office building. To read more about like-kind real estate, click here.
Not if your attorney has provided you any non-exchange related legal services within the two-year period prior to the exchange. Click here to read more about qualified and disqualified parties.
