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1031 Exchange ExplainedWhy use a 1031 exchange
An investor in real estate understands how important
it is to preserve wealth and assets. In the
frequently changing world of taxation, the investor
is fortunate to have IRC Section 1031.
IRC Section 1031 provides that no gain or loss will
be recognized on the exchange of any type of business
use or investment property for any other business use
or investment property. This means that a 1031
exchange is a rollover of equity of like properties,
rather than an avoidance of tax.
1031 IRC Exchanges are not really exchanges in the
context of two-party barter. Instead, they are
typical sales and purchases that involve the same
exact ingredients as any other sale or purchase,
without the capital gains. The only real difference
is the investor is increasing his selling and buying
power by electing to avoid the drain of taxes under
IRC Section 1031 regulations. No other aspects of the
transaction are affected.
The like-kind exchange under Section 1031 is
tax-deferred, not tax-free. When the replacement
property is ultimately sold (not as part of another
exchange), the original deferred gain, plus any
additional gain realized since the purchase of the
replacement property, is subject to tax.
A popular choice among real estate investors seeking
replacement property for their IRC Section 1031 tax
deferred exchange is 1031 Tenants In Common Ownership
(TIC). If you are interested in learning more about
Tenant In Common Investments, Call me and I will
gladly refer you to a licensed representative who
will contact you in the near future in adherence of
the "Accredited Investor" rules and regulations.
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