What is 1031 Exchange?

• An investor has a $200,000 capital gain and incurs a tax liability of approximately $50,000 in combined taxes (depreciation recapture, federal and state capital gain taxes) when the property is sold. Only $130,000 remains to reinvest in another property.
• Assuming a 25% down payment and a 75% loan-to-value ratio, the seller would only be able to purchase a $520,000 new property.
• If the same investor chose to exchange, however, he or she would be able to reinvest the entire $200,000 of equity in the purchase of $800,000 in real estate, assuming the same down payment and loan-to-value ratios

As the above example demonstrates, exchanges protect investors from capital gain taxes as well as facilitating significant portfolio growth and increased return on investment. In order to access the full potential of these benefits, it is crucial to have a comprehensive knowledge of the exchange process and the IRC.

For instance, an accurate understanding of the key term "like-kind" - often mistakenly thought to mean the same exact types of property - can reveal possibilities that might have been dismissed or overlooked. Priority One Realty is your resource to obtain accurate and thorough information about the entire exchange process.

This information is not intended to replace qualified legal and/or tax advisor's.
Each investment must be reviewed, each specific transaction is unique, your
legal and/or tax advisor are important to your strategy of 1031 Exchange.