What is a 1031 Exchange?

[Account Closed]

Can someone explain to me how a 1031 Exchange can be used to fund a deal? What are the advantages?

[Chris McCormack]

Tax deferred exchange of property. You sell a property, you'll likely pay 15-20% in capital gains tax. IRS says you can defer that tax by using the money received to buy another property of equal or greater value. 

Couple things worth noting:

- There are time restrictions for when the property has to be identified and secured

- An intermediary like @Dave Foster has to hold the funds until purchase of the new property

- The taxes are deferred so eventually you will pay them, UNLESS you continue to do it until you die OR look for other ways to mitigate capital gains tax by working with a strategic CPA

Hope this helps @Account Closed