For those who want to avoid paying Uncle Sam his dues (taxes) in whatever legal and reasonable way possible, a 1031 exchange could be an attractive option. Should you also own investment properties, particularly ones likely to beget a hefty profit (and subsequent tax bill), a 1031 exchange could be an imperative tool in your transactions.
Defining a 1031 Exchange
Named after section 1031 of the United States Internal Revenue Code (IRC), the 1031 exchange is a method used to postpone any capital gains taxes on the sale of a property (business or investment). Often referred to as a “like-kind” exchange, it is made possible by using the proceeds to buy a similar property.
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