The Benefits of 1031 Tax Exchange

1031 exchange, also known as a tax-deferred exchange, allows to sell investment property and to defer capital gains and depreciation recapture taxes. This assumes reinvestment of 100% of the equity into like-kind property that is of equal or greater value. Any property that can be used for investment purposes or for productive use in a trade or business generally qualifies as like-kind property for 1031 exchange purposes.

This section of the Internal Revenue Code contains one of the most powerful provisions of the tax code for real estate investors. Many highly successful real estate investors have benefited from this tax code provision in combination with aggressive pyramiding and upgrading strategies to amass huge investment property portfolios, which is the best part about the exchange code. The tax that can be saved may be maximized to increase cash flow and overall net worth. The compounding effects of leveraging the equity in investments extending over several holding periods can potentially produce higher actual dollar returns, new depreciation schedules to tax shelter cash flow, and accelerate equity accumulation. This potentially increases the accumulated cash benefits that the 1031 exchange yields.

A 1031 exchange enables the investor to defer capital gains and depreciation recapture taxes. He can also harvest dormant equity at predictable time intervals with a 1031 exchange to maximize the inherent benefits of the real estate investments. 1031 exchanges that are structured as Tenants In Common (TIC) interest ownership provide real estate investors with a range of opportunities to meet personal investment objectives. This exchange includes property type, geographic diversification, and most importantly the elimination of day-to-day property management obligations.

Various other uses of 1031 exchange can be quoted as it encourages investment in larger, institutional grade properties and it also helps investors diversify the real estate investment portfolio. Most importantly, it widens the access to the nation's leading real estate service providers. These companies provide valuable sources about investment property and garner fixed-rate, non-recourse financing with institutional terms for Tenants In Common owners.

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1031 Tax Exchange provides detailed information on 1031 Tax Exchange, 1031 Tax Exchange Laws, 1031 Tax Exchange Opportunities, 1031 Tax Exchange Forms and more. 1031 Tax Exchange is affiliated with 1031 Exchange Requirements.

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