1031 Exchange Explained

1031 Exchange Explained

Internal Revenue Code allows an investment property investor of investment commercial investment property to exchange commercial investment property and defer paying federal and state capital gain taxes (20%+ applicable state taxes) in the event that they purchase a like-kind commercial investment property. A tax-deferred exchange is a method by which an investment property investor trades one or more relinquished commercial investment properties for one or more replacement commercial investment properties of like-kind, while deferring the payment of federal income taxes and some state taxes on the transaction. By deferring any applicable taxes, the investment property investor has more money available to invest in other commercial investment property. In effect, you receive an interest free loan from the federal government in the amount you would have paid in taxes.

When combined with a 1031 exchange, tenant in common commercial investment properties can be even more attractive. 1031 Exchanges allow you to defer capital gains taxes by investing in a like commercial investment property. When using tenant in common commercial investment properties with a 1031 exchange, you can defer capital gains while diversifying your investments. You can purchase shares of various tenant in common commercial investment properties in different locales with the proceeds of the 1031 sale.

If you are considering the sale of an investment commercial investment property, contact a specialist today to discuss your 1031 exchange options.

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