Why Do a 1031 Exchange Rather Than Selling Outright?

A properly executed #1031 exchange allows an investor to defer paying all the capital gains taxes on the transaction. Put another way, this tax-deferral equates to a long-term and interest-free loan from the IRS. In addition, the investor retains all their gross net equity and has it available to reinvest so they can acquire bigger and better real estate. This would not be possible if they had simply sold outright and paid taxes on the sale.

This points out the superiority of a 1031 exchange over an outright sale without replacement of the investment property. It isn’t the tax deferral, per se, but the immediate increase in purchasing power generated by the tax savings. This allows you to jumpstart your real estate investment portfolio and move on to bigger and more lucrative properties faster.

If a 1031 exchange is in your future, visit our website to learn more about these powerful tax deferral tools and our qualified intermediary and replacement property locator services.