Like most licensed professions, real estate licensees have to take continuing education courses every year. Some of those courses are mandatory — legal updates and such, and the rest are elective. This year I decided to take a course on 1031 Tax Free Exchanges

A 1031 Exchange [also called a Tax-Free Exchange, a Like-Kind Exchange, or a Starker Exchange] is a mechanism that allows investors to sell their investment property and reinvest the proceeds in another property without paying capital gains tax. You won’t avoid paying the tax entirely, but you can delay paying the taxman until much later. It’s somewhat like doing an IRA rollover — you sell all the assets in your old IRA/real estate and move the assets over to the new IRA/real estate without paying capital gains until you ultimately cash out.

There is an administrative burden. In particular, you need a “qualified intermediary” to manage the transaction [remember the IRA rollover example -- you can't touch the money]. A 1031 exchange, however, is still a great way to manage your investment property both now and in the future.

If you would like to know more about 1031 Exchanges, email me. I’d be happy to refer you to a Qualified Intermediary and help you with the sale/purchase of your investment property.

Tags: investment

This entry was posted on Tuesday, May 19th, 2009 at 9:24 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.