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A tax deferred exchange is a method by which a taxpayer trades property, held for investment or business purposes, for replacement property resulting in a deferral of tax on the transaction. Selling a business or investment property for a profit results in a gain, which is taxable. This capital gains tax varies depending upon your particular situation. 1031 Exchanges are often referred to as "tax free exchanges" as the transaction itself is not taxed. Section 1031 of the Internal Revenue Code provides an exemption from current recognition of realized gain, providing that the requirements of the IRC are carefully met. Capital gains tax is deferred until the replacement property is sold, but is if the replacement property is later exchanged through a 1031, the tax is again deferred.
A large percentage of our real estate transactions involve a "1031 exchange. Although the process may appear difficult, let our experience and expertise work for you in savings an often substantial amount of money. We can guide you through the specific order in which the transaction is required to take place to avoid a potential tax liability. We stress the importance of involving your attorney, accountant and a qualified intermediary before initiating the process. |