|A 1031 exchange is one of the few methods available to defer or potentially get rid of taxes
due on the sale of qualifying properties.
By deferring the tax, you have more cash available to invest in another property. In effect,
you receive an interest free loan from the federal government, in the amount you would
have paid in taxes. Any gain from depreciation recapture is postponed. You can acquire
and dispose of properties to reallocate your investment portfolio without paying tax on any
There are many ways to benefit from a §1031 exchange. The following are just a few of the
advantages to this powerful investment strategy:
Tax Savings: Federal and State taxes combined can be as high as 28% of the gain on an
Leverage: Every dollar you save in taxes allows you to increase your investment portfolio
through acquisition of real estate worth many times your initial purchase.
Income: Increase your cash flow by exchanging out of bare lands and into an
Consolidation: Exchange from several management-intensive properties into a larger
property with on/off-site management.
Estate Planning: Continue to avoid recognizing gain until death, at which time the gain may
escape income taxation because of the stepped-up basis that the taxpayer's heirs may
obtain in the property.