1031 Exchange Explained

Internal Revenue Code allows a real estate investor of rental real estate to exchange rental real estate and defer paying federal and state capital gain taxes (20%+ applicable state taxes) in the event that they purchase a like-kind rental real estate. A tax-deferred exchange is a method by which a real estate investors trades one or more relinquished rental real estate for one or more replacement rental real estate of like-kind, while deferring the payment of federal income taxes and some state taxes on the transaction.

Completing a 1031 exchange with a tenancy in common interest ownership in a rental real estate allows real estate investors not only to defer their capital gains taxes, but to also upgrade their rental real estate into larger, institutional-grade rental real estate. Essentially, 1031 exchanges allow real estate investors to use all of the proceeds from their sale as leverage to gain access to more valuable rental real estate.

If you are thinking of transferring any rental real estate, contact us today for more information on 1031 exchanges. A 1031 exchange permits 1031 exchange real estate real estate investors to sell a rental real estate and defer tax payments by reinvesting the proceeds into a like-kind 1031 exchange real estate or rental real estate. A tenants in common is a form of ownership that permits participants to enjoy the rewards of rental real estate ownership without participating in the ongoing management of a rental real estate. A tenancy in common exchange yields an inherent interest in rental real estate and offers several benefits as a qualified 1031 exchange.

Performing a 1031 exchange allows real estate investors to use all of the proceeds from the initial sale of rental real estate as leverage for entering into more lucrative rental real estate deals. The advantages of entering into a tenancy in common are increased cash flow and diversified investment portfolios while deferring capital gains taxes at the same time.

If you recently sold a rental real estate or you're considering selling a current rental real estate, we can match you with a 1031 advisor that can assist you in facilitating the exchange process.