The True Power of Exchanging…
Simply put, a §1031 exchange allows you to sell your investment/income property while deferring capital gains tax by reinvesting 100% of your equity into another property of equal or greater value.
The true power of exchanging is the ability to meet your investment objectives without losing equity to taxation. Known as leveraging, this method of acquiring real estate helps you purchase property many times the value of your initial investment.The main requirement is that your property or business asset has been held for productive use in a trade or business, or for investment purposes, and be exchanged for like-kind replacement property.
Keep in mind:
Investors are able to maximize their capital by deferring the taxes that would otherwise be incurred on an outright sale of their property by utilizing an exchange. You can use the entire amount of the equity from the exchange to acquire substantially more replacement property.Properly structured and administered, an exchange becomes an invaluable tax saving tool and an integral element of investment strategy.