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Section 1031 tax deferred exchanges continue to increase in popularity as
more investors nationwide discover the wide range of investment objectives that
can be easily met through exchanging.
Preservation Of Equity
A properly structured exchange provides real
estate investors with the opportunity to defer 100% of both Federal and State
capital gain taxes. This essentially equals an interest-free, no-term loan on
taxes due until the property is sold for cash! Most often, the capital gain
taxes are deferred indefinitely because many investors continue to exchange from
one property to the next, dramatically increasing the value of their real estate
investments with each exchange!
Leverage
Many investors exchange from a property where
they have a high equity position or one that is "free and clear" into a much
more valuable property. A larger property produces more cash flow and provides
greater depreciation benefits, which therefore increase an investors return on
their investment.
Often a number of family members inherit one
large property and disagree about what they want to do with it. Some want to
continue holding the investment and some desire to sell it immediately for cash.
By exchanging from one large property into several smaller properties, an
investor can designate that, after their death, each heir will receive a
different property which they can either hold or sell.
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