Over half of our business involves 1031 tax deferred exchanges. Please contact us for more information on how you can increase your cash flow, alleviate management responsibilities, and further leverage your real estate portfolio without paying capital gains taxes.
1031 Tax Deferred Exchange
A tax-deferred exchange is a transaction involving the transfer of one or more pieces of investment or income property and the receipt of like kind property; “like-kind” is defined as property that will be held for investment, income-producing purposes, or for productive use in a trade or business.
Under IRC Section 1031 the investor is able to defer the recognition of capital gain taxes that would otherwise be incurred on the sale of investment property. The investor can then use the entire amount of the equity to purchase other investment real estate. To qualify as an exchange the relinquished and replacement properties must be “like-kind” properties and the transaction must be structured as an exchange.
When deciding if a 1031 Exchange is right for your situation, determining your taxable gain on the sale of your property is helpful. To figure your profit, you need to subtract the cost of the property from the net sales price.
You will need to know how much the property has cost you, starting from when you bought it, and proceeding through the years as you made improvements, or took deductions for depreciation over the years. The result is called your adjusted basis, because it has been heavily adjusted over the years, and it forms the basis of any calculation of profit or loss.
Subtract your adjusted basis in the property from the net sales price to get your taxable gain. Example
See the figures