What are the benefits of exchanging vs. selling outright?
A Section 1031 exchange enables you to postpone taxes from the sale of qualifying properties. By deferring the tax, you have more money available to invest in another property. You can acquire and dispose of properties to reallocate your investment portfolio without paying tax on the current gains. Is “tax deferred” the same as “tax free?” No. With a 1031 exchange, you defer paying the capital gains taxes on your relinquished property but the tax basis is carried over to your replacement property. When you sell the replacement property without doing an exchange, you will pay the tax at that time. What do you mean when you refer to “basis?” Basis is the initial investment in the original property, increased by capital expenditures and decreased by allowable depreciation or cost recovery. It is used to calculate the amount of capital gain you will realize. For example, if you originally purchased a property for $250k and $200k of the $250k was dedicated to improvements and real estate (d
