| 1031 Exchanges are excellent tools to reduce income | | | | In a typical property sale, an owner has to pay taxes |
| taxes. Known both as "tax free exchanges" and "1031 | | | | on any gain. In some cases, a 1031 exchange does not |
| exchanges" (based upon the enabling section of the | | | | make sense or is not practical. If an investor is trying to |
| federal income tax code) this tool allows investors to | | | | reduce his real estate asset allocation, or if a limited |
| sell real estate without paying income taxes (at the | | | | partnership has 20 investors with diverse interests, a |
| time of sale). Real estate owners or investors | | | | 1031 exchange would not make sense. In a properly |
| expecting to acquire property subsequent to the sale | | | | executed Section 1031 exchange, the realized tax is |
| of existing property can indefinitely defer income taxes | | | | deferred. These transactions are sanctioned under |
| by utilizing a 1031 exchange. 1031 exchanges have | | | | Section 1031 of the Internal Revenue Code and are |
| been available for over 20 year. Their popularity | | | | often referred to as "1031 exchanges," "like-kind |
| seems to have increased sharply over the last 7-10 | | | | exchanges" or "tax-deferred exchanges. |
| years as their benefits have become known. | | | | |