What Can You Expect to Gain From a 1031 Exchange?

1031 Exchange Gains

The biggest and most important question taxpayers ask themselves before doing a 1031 exchange is "what can I expect to gain from this transaction?" That's our question for today's 1031 education article.

Defer Your Capital Gains

The primary benefit that you gain is that you are deferring indefinitely the capital gains and state income tax liabilities that you would ordinarily have if you were recognizing the gains on the sale of property.

1031 says that no gain or loss shall be recognized if you dispose of a property that's been held for a qualified purpose (investment or business purposes), and you acquire a like-kind property that’s also going to be held for investment purposes. The gain for you is that these profits are not taxable in the current year of disposition and may stay deferred indefinitely.

Avoid Unnecessary Taxes

So the big gain is that you don't have to pay taxes unnecessarily upon the sale of your relinquished property and you defer those gains and roll them into your new replacement property, which may never be sold. If it is disposed of, it may be disposed of after your passing, so that your heirs will have that property with a stepped up basis, effectively eliminating the tax perpetually.

  • 1031 Hotline: 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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