Using the 1031 exchange provision, you can build a sizeable real estate portfolio during your lifetime by deferring your gains and compounding your equity over time. But what happens when you reach the end of your life?
Section 1014 says that when you die and your heirs inherit the property, they don’t take your low basis that you carried during your lifetime. Rather, the heirs take the fair market value of the property at the time of the decedent’s death. This is a bit of an oversimplification, but generally speaking, your heir is going to receive that property with a step up in basis.
Let’s say that you die owning 500 units of apartments, free and clear. Your heirs would then be able to sell those apartments with almost no tax because of the step up in basis. This example illustrates why many taxpayers who own investment real estate choose to conduct 1031 exchanges throughout their lives, deferring their capital gains tax burden all the way until they can will the property with a stepped up basis to their heirs upon their death.
Nationwide 1031 Exchange Services
At CPEC1031, LLC we provide nationwide 1031 exchange services to taxpayers looking to defer their capital gains taxes when selling investment real property. With over twenty years of experience, our intermediaries are ready and equipped to help you through the labyrinth of details involved in your like-kind exchange. Contact us today to learn more about the like-kind exchange services we provide and see how we can help you save money in taxes via the awesome power of section 1031! Our offices are located in Minneapolis, but we serve the entire United States.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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