Benefits of Exchanging

Prior to 1979, trading properties was at best complicated. Completing a tax deferred exchange meant properties had to be "swapped" simultaneously. Unfortunately, this made exchanging cumbersome and risky, if not impossible.

The 1979 Starker decision in the U.S. 9th Circuit Court of Appeals enabled the non-simultaneous or "delayed" exchange to qualify for tax deferral. This gave investors the time necessary to find desirable replacement properties by using an Intermediary.

Treasury Regulations effective June 10, 1991 validated the delayed exchange and simplified the exchange process. These Regulations which included the use of Qualified Intermediaries, were welcomed by real estate investors who were previously uncertain of the viability of 1031 transactions.

Many investors have held property for years because a sale translated into paying substantial taxes on their capital gain. Recent changes still do not offset the benefits of exchanging. Typically, as an investor's needs change over the years, the type of investment property they want changes. Relocation, estate building, retirement, desire to increase cash flow, to reduce management responsibilities, all affect the type of property investors want to own. Under IRC Section 1031, investors now have the alternative of moving their investments (and equities) into more desirable or profitable properties.

The true power of exchanging is the ability to meet investment objectives without losing equity to taxation.

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	1031 Tax Exchange PDF file.

Disclosure
Jerry Babin - Realtor with RE/MAX Southern Realty cannot advise you concerning the specific tax consequences or advisability of a deferred exchange for tax planning purposes. You will be required to seek the counsel of your accountant or attorney. If we can answer any of your general questions, or those of your representatives, please do not hesitate to contact us.