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1031 Tax Exchange

1031 tax exchange allows businesses or individuals to defer a capital gains tax on the sale of property by exchanging property of like-kind used for business or investment purposes.

Key points about a 1031 exchange:

  • The exchange does not generate cash.
  • The exchange defers tax liability until the gained asset is sold for cash.
  • Properties exchanged must be of “like-kind,” meaning of a similar nature, not similar quality. For example, real property can be exchanged for another kind of real property (i.e., land for a building), and the property exchanged can be of differing values. However, land can not be exchanged for stocks, as they are not like-kind.
  • Both assets being exchanged must be either used for business purposes or held as an investment.
  • Can be used to build a real estate portfolio, as deferring tax liability allows an individual to invest the money that would have gone to pay the tax debt into more property.

To learn more about conducting a 1031 exchange, contact The Sandlin Team, and we’ll be happy to answer all your questions and determine if an exchange would be beneficial for you.