When to Consider a 1031 Exchange Instead of a Straight-Forward Sale

1031 Sale

When you’re getting ready to dispose of a piece of real estate, it can be difficult to choose how to proceed. In this article, we are going to discuss when you should consider doing a 1031 exchange of real estate rather than an outright sale.

1031 Exchange vs. Straight-Forward Sale

First, let’s talk about the difference between a 1031 exchange and a straight-forward sale. In a typical, straight-forward sale, the taxpayer sells their property, pockets the sales proceeds, and is responsible for paying capital gains taxes on the sale. With a 1031 exchange, the taxpayer sells the property, but instead of pocketing the proceeds – they reinvest that capital into a replacement property. In doing so, they are able to defer 100% of their capital gains tax liability.

Making a Decision

If you are in dire need of liquidity, a straight-forward sale is probably your best bet as you are not allowed to pocket any of the gains in a 1031 exchange. However, a 1031 exchange is the most tax-advantageous way of selling real estate. If you don’t absolutely need the sales proceeds, it’s worth it to consider a like-kind exchange due to the immense tax savings.

Defer Your Taxes when Selling Real Estate

The qualified intermediaries at CPEC1031 have over twenty years of experience in the like-kind exchange industry. We have the knowledge and the skills to ensure that your 1031 exchange is successful. Contact our 1031 exchange professionals today to learn more about how a 1031 exchange can help you defer capital gains taxes. Our primary office is located in downtown Minneapolis. We also have satellite offices throughout the United States.

  • 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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