TAX STRATEGY FOR THE REAL ESTATE INVESTOR…

THE 1031 EXCHANGE

The Internal Revenue Code Section 1031 allows for what is known as a “1031 Exchange” which is a method by which a property owner exchanges one or more relinquished properties for one or more replacement properties of "like-kind", while deferring the recognition of the capital gains and other taxes on the transaction.  Although there are several variations of a 1031 Exchange, the most common and practical application of the 1031 Exchange is what is also known as a 1031 Starker Exchange.

The 1031 Exchange is a tax deferred strategy that accomplishes 100% deferral of capital gains indefinitely. By using a 1031 Exchange for the deferral of capital gains taxes, you are able to preserve the value of your real estate which enables you to secure more lucrative properties. This process of trading up and preservation are part of the wealth building cycle for real estate investors and wealth builders.