What is a 1031 tax exchange?

A 1031 tax exchange allows businesses or individuals to defer a capital gains tax on the sale of property by exchanging property of like-kind used for business or investment purposes.

Key points about a 1031 exchange:

• The exchange does not generate cash.
• The exchange defers tax liability until the gained asset is sold for cash.
• Properties exchanged must be of a “like-kind,” meaning of a similar nature, not similar quality: For example, real property can be exchanged for another kind of real property (i.e. land for a building), and the property exchanged can be of differing values. However, land can not be exchanged for stocks, as they are not of a like-kind.
• Both assets being exchanged must be either used for business purposes or held as an investment.
• The exchange can be used to build a real estate portfolio, as deferring tax liability allows an individual to invest the money that would have gone to pay the tax debt into more property.

To learn more about conducting a 1031 exchange, or for more information on real estate investments, Atlanta Home Connections will be happy to answer all your questions and determine if an exchange would be beneficial for you. Please submit your contact information below.