Property Investors Get An Interest Free Loan From Uncle Sam With A Section 1031 Exchange |
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| By Trisha Coppley |
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| keywords: 1031 exchange 1031 tax exchange 1031 exchanges deferred exchanges tax deferred like kind exchange 1031 1031 real estate exchange | ||||
| The 1031 tax exchange is a tactic used by investors in real
estate so that they may defer capital gains tax liability on
the sale of a property. This is accomplished by
relinquishing rights to a piece of property one plans on
selling to a qualified intermediary, who then holds on to
the proceeds from its sale and uses them to buy a
replacement that complies with the regulations delineated in
Section 1031 of US tax code. While the present interest in the 1031 tax exchange may lead one to believe that Section 1031 only recently came on the scene, this is not actually true. In reality, the 1031's history stretches all the way back to 1921, though the original concept was significantly different than what we presently think of as an exchange. The 1031 Exchange truly came into its own in the 1970s, which saw many significant modifications in the manner in which these exchanges were conducted. These modifications resulted in a more far-reaching conception of the process and generated increased interest among real estate investors. The indefinite capital gains tax deferral an exchange provides to the taxpayer may, at first glance, appear to represent a gift from the government, however it is, in reality, more like an interest free loan, because there is an expectation that the investor will repay the extra money gained from the deferral by accepting capital gains liability upon the subsequent sale of a replacement property. In addition, this interest-free loan is one that may be kept by the investor for an indefinite period of time; an investor can choose to conduct any number of exchanges before finally electing to sell outright, at which point taxpayer must pay taxes. Section 1031 of US tax code represents a mutually advantageous arrangement between the investor and the United States government, providing a benefit for the U.S. economy as a whole in addition to the individual taxpayer. In viewing the transfer of value in an exchange as representing a continuation of a preexisting investment rather than as a separate transaction liable to be taxed, taxpayers gain the opportunity to transfer their money to the best possible investments, which, in turn, boosts the country's economy by encouraging the growth of new jobs. As with anything, Section 1031 has skeptics. one criticism that has been leveled against Section 1031 is that the tax free profit gained by to the taxpayer in a 1031 exchange represents an unfair advantage. Another common issue of concern is that the strict time limits imposed on steps in the 1031 procedure could promote a frenetic rate of buying, with a resultant increase in the cost of replacement properties. These complaints, however, are only tenuously based in hard evidence, and the odds that Section 1031 will see any noteworthy change in the coming years are low. Looking at the big picture, most will agree that Section 1031 is immensely helpful to all parties involved, as it allows taxpayers increased profits on the sale of property while additionally encouraging job growth and consequently promoting the greater good of the country as a whole. There is no reason to doubt that the 1031 tax exchange is destined to remain a part of the investment world for decades to come. |
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| keywords: 1031 exchange 1031 tax exchange 1031 exchanges deferred exchanges tax deferred like kind exchange 1031 1031 real estate exchange | ||||
| Article Source: http://interpret.zar.vg | ||||
| About The Author Many Types Of Investment Property Qualify For A 1031 Like Kind Exchange. Be Sure To Consult With A 1031 Exchange Company To Maximize Your Tax Savings. More Information Is Available At www.Top1031Exchange.com |
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