Section
1031 Exchange
A 1031 property exchange is an
effective way to defer paying taxes that would otherwise have been due
on the first sale. For example - an investor bought a commercial
property, a strip mall, for $200,000. After 6 years he sells the
property for $250,000.
This results in a gain of $50,000 and the investor would have to pay
capital gains tax on this amount. However if he invests the $250,000 in
another commercial real estate (like kind - does not have to be a strip
mall), then he does not have to pay any taxes now i.e he defers his
taxes till a later date. |
