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Real Estate has a big advantage with the 1031 Exchange tax code that was enacted a while back. Even if you only have one house you are selling it pays to check out the tax free option you have with a 1031 exhange.

This is a legal transaction that is free on any income tax and is actually supported by the IRS. The simplicity of it is that two properties are exchanged by selling one and buying the another with the proceeds which is “like kind”, i.e. used for business or for investment. Using the IRS Codes you mix and match and are not limited to exchanging property similar or exactly like your present property. The “like kind” is more for business or investment designation.

Here’s an example, an eight unit apartment building could be exchanged for raw land or a commercial mall. The exchange would have to be structured properly and done through a licensed intermediary, so all you have to do is find what you want. Basically selling real property used for business or investment and buying any other type of business or investment property or properties is what we are talking about, tax free. Another example of a “like kind” transaction would be exchanging or trading a self operated laundry business for a few houses or an apartment complex, something like that.

Go here for the complete article of What is a 1031 Exchange and other resources

This entry was posted on Friday, June 8th, 2007 at 9:46 am and is filed under IRS, Investing, Personal Taxes, Real Estate, Real Estate Development. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.