1031 exchanges offer a great vehicle for deferring capital gains taxes – but they’re not for everyone. Just like any other real estate decision, you should carefully weigh the pros and cons to see if a 1031 exchange is the right option for you. In this article, we are going to lay out some of the pros and cons of a 1031 exchange of real estate.
Pro: Tax Deferral
The number one benefit of a 1031 exchange is that it allows you to defer your capital gains taxes when you sell real estate.
Con: You Don’t Get to Keep Your Proceeds
In any 1031 exchange, you need to move your net proceeds into a new (bigger and better) replacement property. That means you do not get to pocket any of the proceeds from the sale. This may be an issue for taxpayers who are in need of liquid assets.
Pro: Greater Investment in the Long-run
Even though you aren’t able to pocket your sales proceeds, the amount of money you save in tax deferral, as well as the money that will compound in your continued investment make for a greater investment in the long-run.
Real Estate Like-Kind Exchanges
At CPEC1031 we work with clients all over the state of Minnesota, as well as across the country, on their 1031 exchanges of real estate. Our qualified intermediaries have twenty years of experience and can help you with your 1031 exchange documents and answer all of your questions. Reach out to us today if you want to learn more about the benefits of the 1031 exchange, or to start your real property exchange. Our main office is in downtown Minneapolis.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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