What Is An Exchange?

Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain. How much tax you pay will vary depending on what state you live in and your circumstances, but taxes may consume up to 45% of the gain.

A 1031 Exchange enables the deferral of taxes allowing sale proceeds to be reinvested in like-kind property of equal or greater value. Preserving capital increases the investor's buying power, particularly through enhanced leverage, amplifying the wealth-building power of capital assets.

A 1031 Exchange is often called "tax free exchange" because tax is not paid on the transaction. Tax free exchanges have been around since the 1920's but guidelines have changed throughout history .

Details can seem complicated, but with an experienced professional guiding your transactions, you can be assured that your tax-free exchanges are easy, worry-free and most important, safe.

Here are some goals you can accomplish through a 1031 exchange

Increase Cash Flow
Exchange 40 acres of non-productive bare land for cash-flow rich mini-storage units.

Ease Your Tax Burden
Exchange your apartment complex for a commercial building with a triple-net lease or perhaps a tenant-in-common type property.

Change location
For example, you might exchange rental houses in California for rental houses in New York. This is usually done when the owner moves and wants his/her investment close by, or wants to move their investments to a better, more dynamic market.

Improve the Quality of Your Investment
You could exchange your 40-year old strip mall for a recently built commercial property.

Turn Your Investment into a Newly Constructed Property
For instance, if you exchanged rental houses for a new apartment complex you have built via a construction exchange.

Diversify
You could exchange a single-tenant commercial building for multiple-tenant duplexes.

"Relocate" Your Vacation Home
Depending on circumstances , you could exchange a vacation home in Jackson Hole, Wyoming for a new vacation home in Aspen, CO.

If structured properly, all of the goals in the above examples can be accomplished without having to pay any tax to the federal or state governments.