In the simplest of terms, a 1031 Exchange (aka a “Starker exchange” or a “Like Kind exchange”) is a trade of one investment property for another.
This allows an investor to “defer” paying capital gains taxes on an investment property when it is sold, as long as another “like-kind property” is purchased with the profit gained by the sale of the first property.
In effect, you can change the form of your investment without cashing out or recognizing a capital gain which allows your investment to continue to grow tax deferred.
There is no limit on how many times or how frequently you can do a 1031. You can roll over the gain from one piece of investment real estate to another to another and another. Although you may have a profit on each swap, you avoid tax until you actually sell it for cash many years later.
Although there are many benefits of doing a 1031 Exchange, there are very specific rules that you need to follow in order to comply with IRS regulations to defer your capital gains taxes. Unfortunately, many individuals who are engaging in a 1031 exchange may find that they have made mistakes that are irreparable.
In short, it is essential to follow the guidelines of the IRS from start to finish.
As part of The Equity Finders’ continuing effort to make you wealthy in real estate, and to help you avoid common mistakes regarding 1031 Exchanges, our own Andy Myers sat down for a brief discussion with the Senior Vice President of IPX1031, Mr. Jim Miller.
IPX1031 is a unique company focusing solely on 1031 Tax Deferred Exchanges and is the national leader in 1031 Exchange services. In this short 15 minutes interview, you will learn more about 1031 Exchanges, their benefits, as well as common mistakes to avoid.
Did you know that you can use our “Exclusive Smart Map Technology” to find and research properties with existing equity that you can use for your next 1031 Tax Deferred Exchange?
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