Tax Deferred Exchange Explained

Tax Deferred Exchange Explained

A tax-deferred exchange is a method by which a property investor trades one or more relinquished commercial properties for one or more replacement commercial properties of like-kind, while deferring the payment of federal income taxes and some state taxes on the transaction. In turn, internal revenue code provides that no gain or loss shall be recognized on the exchange of commercial property held for productive use in a trade or business. By deferring any applicable taxes, the property investor has more money available to invest in other commercial property. In effect, you receive an interest free loan from the federal government in the amount you would have paid in taxes.

When combined with a tax deferred exchange, TIC commercial properties can be even more attractive. Tax Deferred Exchanges allow you to defer capital gains taxes by investing in a like commercial property. When using TIC commercial properties with a tax deferred exchange, you can defer capital gains while diversifying your investments. You can purchase shares of various TIC commercial properties in different locales with the proceeds of the 1031 sale.

If you are considering the sale of an investment commercial property, contact a specialist today to discuss your tax deferred exchange options.



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