Whats the benefit of Exchanging if the Taxpayer will eventually have to pay taxes anyway?
With proper estate planning, the Taxpayer may never have to pay capital gains tax! There are many tax planning vehicles that allow taxpayers to relinquish low-basis assets (such as real estate) without paying taxes. Gifts to loved ones, charitable contributions and certain irrevocable trusts are just a few options available to savvy taxpayers. Even without a complex estate scheme, a taxpayer who exchanges will still benefit their heirs when they pass away. The real property that transfers to the heirs will receive a stepped-up basis to the fair market value. This means that all capital gains in the property will be eliminated, provided the estate does not exceed the statutory exclusion limitations relevant to estate taxes.
