Let’s do a little 1031 exchange history lesson.
If you go back in the tax code, we had a hodgepodge of laws with very little rhyme or reason. Congress would pass a law and stick it in the book. In 1921, the first iteration of the 1031 exchange was put in the code. However, it wasn’t called a “1031 exchange” yet because the Internal Revenue Code as we know it now didn’t even exist.
That first version allowed for the deferral of tax when there was a swap (of real estate or other assets). The contemplated modality was that you trade someone your farm and the other party trades you their farm in a simple swap. The thinking was that people in that situation shouldn’t be penalized with taxes if they’re just continuing their investment in a different but equivalent property. That rationale continues to this day in the realm of 1031 exchanges – don’t cash out!
Reinvest Your Sales Proceeds and Defer Your Capital Gains Taxes in a Like-Kind Exchange
With a 1031 exchange, you can defer your capital gains taxes by reinvesting the net proceeds from the sale of investment real estate. The benefits of doing so are numerous. You get to keep your money compounding and building over time in a continued investment rather than simply paying a big tax bill. Like-kind exchanges can be conducted by any US taxpayer – provided your property meets certain benchmarks. Contact the intermediaries at CPEC1031, LLC today to get help with your next 1031 exchange of investment real estate.
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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