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Why consider a Tax Deferred Exchange

IRC Section 1031 permits a taxpayer to exchange property held for a productive use in a trade or business or as an investment for property of a "like-kind" without any current recognition of gain subject to certain limitations.

There are many situations for which you may want to consider a Tax Deferred
Exchange:

• You may have property located in an area far from you, but you are reluctant to sell it and acquire another investment property
  closer to you because of the capital gains tax burden upon that property's sale. Don't sell ... exchange and
  defer the capital gains tax.
• You may own raw land that produces no income and none of the advantages of depreciation. It requires a yearly payment of property taxes. Exchange that raw land for income-generating property and produce a monthly cash flow.
• If you sell property and reinvest in other property, even if the
  reinvestment is made immediately, you pay capital gains taxes. If you
  structure that same transaction in a fashion that the Internal Revenue
  Service deems to be an exchange, you defer the capital gains taxes!
• If you own a property that ceases to appreciate in value, exchange it for another property with lucrative potential of better
  appreciation.
• If you have significant capital gains in property and exchange, you keep the money and use it toward the down payment on your new investment property. If you owe $15,000 to Uncle Sam in taxes, by exchanging you will pay no taxes now, leaving more money to acquire properties.
• You Don't Have to Swap. You do not have to buy property at the same time you are selling. A "Delayed Exchange" lets you sell now and buy your "replacement" property at a later time.

Certain legal issues regularly arise that may affect the way your exchange is structured. If you are potentially affected by any of the following issues, contact Tax Deferred Exchange Services immediately for further evaluation and clarification.

• Disposition of property held by a partnership.
• Co-ownership of property with another party which may be deemed to be a partnership.
• Improvements that will be made to the target property.
• Changes in your marital status as a taxpayer.
• Rules on number of properties you have identified and designated.
• Seller-carryback financing and its impact on an exchange.
• Primary residence versus commercial or investment use.
• Blended property: part residential - part commercial/investment.
• Acquiring the target property before the exchange property ("Reverse Exchange").

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