Defer Your Capital Gains Tax Liability With A 1031 Exchange

Defer Your Capital Gains Tax Liability With A 1031 Exchange - By: Trisha Coppley, Posted on: 2008-03-13

As a real estate investor, you must be aware that each and every dollar that you have invested is making you money, and, conversely, each and every dollar that isn't working for you can be considered a lost opportunity to further increase your funds. So, when it is time to put your property up for sale, you have 2 choices. The first way in which you can cash in on your property's appreciated value is simply to make a outright sale and recognize a gain. Accepting this liability means you'll have to pay capital gains taxes on the sale proceeds. Every time you pay money to the U.S. government you are throwing away potential profits.

The second, and often more lucrative choice is to make a 1031 tax exchange. A 1031 is a great way to keep more of your investment funds making you money. Section 1031 has a provision of non-recognition, which means you aren't obligated to pay the taxes immediately following your sale; in fact, you can defer the taxes indefinitely, while your money is compounded by the extra income produced by investing your tax deferment.

As an example, let's say you own several small investment properties, such as triplexes or duplexes, whose values have increased during the time you have owned them. At this point, your first instinct may be to sell these properties and collect on your investments. A wise investor, however, might decide to make a 1031 exchange and put the proceeds from the sale of these properties towards the purchase of another, larger piece of investment property, which will, itself go on to appreciate in value over time, meanwhile continuing to increase your wealth. Additionally, the extra funds available to you as a result of deferring capital gains taxes will work to heighten your capacity to leverage for further loans, maximizing your future profits.

Section 1031 doesn't apply only to land and buildings, either. You can conduct a 1031 exchange on any type of real estate you are holding for investment in a business or trade, and some kinds of personal property as well, from cranes or backhoes to an aircraft or collector car. As a matter of fact, 1031 exchanges are especially beneficial for those who have money in antiques or collectibles like collector cars, because of the greater capital gains tax liability on the sale of these types of items. You cannot, however, make a 1031 exchange on things like shares of stockor interest gained from a Real Estate Investment Trust.

Next time you find that you are in the position to sell a piece of real estate or other type of investment, take a moment to think of the profit you could gain were you to conduct an exchange instead. If you decide an exchange instead of selling up front, you can maximize your profits and come out on top .

Article Source:- Directory Submission & Sexy Deepika Padukone

Many Investment Properties Qualify For A 1031 Property Exchange. Be Sure To Consult With A 1031 Exchange Intermediary To Maximize Your Tax Savings. More Information Is Available At www.Top1031Exchange.com

Please Rate this Article

Not yet Rated

Click the XML Icon Above to Receive Taxes Articles Via RSS!

Additional Articles From - Home | Finance | Taxes

Link building Service
Directory Submission Service
Seo Services Company
Article Syndication

	Print This Article
	Post Comment
	Add To Favorites
	Email to Friends
	Ezine Ready

Submit Articles
Member Login
Top Authors
Most Popular Articles
Submission Guidelines
Ezine Notifications
Article RSS Feeds

Yoga's World
All Information On Yoga

Top Authors
Most Popular Articles
Submission Guidelines
Ezine Notifications
Article RSS Feeds

New Stuff
About Us
Site Blog
Forum
Link to Us
Contact Us
Privacy Policy
Terms of Service

Ezine Article
Article Directory

EzinesArticle.Com » Copyright © 2006 ~ All Rights Reserved.
Terms of Service | Submission Guidelines | Contact Us | Link to Us