Tax and investment benefits of a 1031 exchange
Advanced Abstract can help you reduce your tax liability with 1031 exchange in Allentown PA, Bethlehem PA, Easton PA, Reading PA or Stroudsburg PA. A 1031 exchange is also known as like-kind exchange. It enables you to swap one business or investment for another and if the swap falls within the scope of IRC Section 1031, there will be little or no immediate tax implications.
1031 exchanges mostly occur within the real estate market. This means an inceptor can swap one property for another and defer the capital gains tax. This provision only applies to commercial or investment property. You can’t swap your primary residence for another,
This provision allows investors to defer capital gains taxes. That means you can roll over the gain from a real estate investment to another. You can do this as often as you want. You don’t pay tax until you sell the investment and that could be many years later or never.
A 1031 exchange applies to investments or properties that are held for productive use or investment purposes. 1031 exchanges enable investors to take advantage of financial principles such as leverage, preservation of equity and diversification.
An investor can exchange from a high equity position in one property to a lower equity in a much larger property with some outside financing. Investors can exchange into different geographical locations. For example, you exchange from residential property into retail or commercial property. Investors can exchange form relinquished properties to an apartment complex.
There are many possible applications of a 1031 exchange. There are also pitfalls and risks. You need an excellent knowledge of IRC Section 1031 in order to properly take advantage of the benefits. That is why should consult with experts such as Advanced Abstract before engaging in 1031 exchanges.