Section 1031 Tax

In principle, when investors sell investment property, they pay taxes on their gains. However, the US government recognizes the value of encouraging re-investment and therefore offers favorable tax treatment to sales that take place under Section 1031 of the Internal Revenue Code. If the investor re-invests in "like-kind" property within the guidelines and time limits of Section 1031, taxes on capital gains will be deferred.

When it comes to real estate, like-kind property generally refers to any investment property located within the US. Therefore, the owner of undeveloped land in California might engage in a 1031 exchange for rental property in Nevada. The owner of an apartment complex in Phoenix might exchange it for a shopping center in Colorado.

As long as the business or commercial property being re-invested in is of equivalent or greater value than the one being sold, the properties will generally qualify for 1031 tax treatment. In fact, one of the advantages of 1031 exchanges is that they provide investors with a way to diversify their holdings geographically while avoiding loss of equity.

Our National Referral Network can help you diversify your real estate portfolio with investments in other geographical markets. Our network throughout the country allows investors and their brokers to tap into local real estate anywhere in the US. Our database of investment property covers a wide variety of commercial property types, too. For more information on our services, please call 1-877-4TM-1031. You may also send us an email here info@tm1031exchange.com.