1031 Tax-Deferred Exchange is Valuable Tool for Investors
Real estate investors are afforded a wonderful opportunity to build wealth and save on taxes via Section 1031 of the Internal Revenue Code. Commonly referred to as a "1031 exchange," investors are thus able to:
- dispose of a current investment property
- apply all equity to aquire replacement investment property
- defer regular capital gain tax
- effectively leverage all equity into the new property
In general, this mechanism allows investors to accomplish many objectives including increased leverage, diversification, enhanced cash flow, consolidation of property, and freedom from joint ownership. Mary Monday, in an Arizona Daily Sun article, strongly recommends the use of 1031 exchanges:
"If you are thinking about selling an investment property you should consider a 1031 exchange. An exchange offers an investor an opportunity to reinvest the federal capital gains that would normally be paid to the IRS and put that money to work for yourself. Essentially, the exchange should be thought of as an interest-free loan from the IRS; one in which the principal may be increased through subsequent exchanges and may never require repayment, if you plan properly."
Arizona investors, in particular, are using 1031 exchanges to acquire multiple newer properties in and around the fast-developing Greater Phoenix area. Here, the Valley's hottest investment areas include Surprise, Goodyear and Avondale, where new homes are sprouting "like desert wildflowers."
4:19:07 PM 
|
