A 1031 exchange, also known a tax-deferred exchange, permits investment property owners to sell a property and defer tax payments by reinvesting the proceeds into a “like-kind” investment property or properties. A 1031 exchange is enabled by Section 1031 of the Internal Revenue Code, thus the name 1031 Exchange.

In order to completely defer the payment of tax with your 1031 exchange, among other things, the replacement property must be of equal or greater value, and all the equity from the sold investment property must be reinvested in the new investment property or properties.

An investor in real estate understands how important it is to preserve wealth and assets. In the frequently changing world of taxation, the investor is fortunate to have IRC Section 1031. This tax code allows the investor to exchange from one investment property to another and defer taxes on the gain.

This means that a 1031 Exchange is a rollover of equity of like properties, rather than an avoidance of tax. Thus the investor continues to build wealth through real estate investment, and maintains the hard earned equity. Any tax liability through inheritance will be limited to the gains from the date of the inheritor’s acquisition, not during the years of ownership. So in essence the taxes that are saved now are never paid.

More importantly, completing a 1031 exchange with a Tenants in Common interest ownership in a property, allows investors not only to defer their capital gains taxes, but also to “upgrade” their investment real estate into larger, or even institutional-grade properties with higher capitalization rates and longer term leases providing steady income and wealth building.

If you recently sold an investment property or you’re considering selling yours, NuLife Capital & Investments can help you with a variety of options. Contact us today for a free consultation, we may in fact already have the right property for you to exchange up to.

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