When you have a piece of investment property that you want to sell, you basically have two options. You can choose to sell the property in a straight-forward transaction, or you can exchange the property under section 1031 of the Internal Revenue Code. How do you choose which option best suits your situation? In this article, we will discuss the difference between a 1031 exchange of real estate and an outright sale.
Outright Sale
In a straight-forward, outright sale, the biggest benefit is that you get to pocket your net proceeds from the sale. However, those sales proceeds will be subject to capital gains tax. When it comes to commercial real estate, this can add up to a pretty large capital gains tax bill. Thankfully, there is an alternative option that allows you to defer this capital gains tax bill – the 1031 exchange.
1031 Exchange
Instead of outright selling your property, you also have the option of exchanging it for another like-kind property. This process allows you to defer your capital gains taxes so long as you move your net proceeds into a suitable replacement property. This also has the added benefit of keeping your money working for you – building interest in a continued investment.
CPEC1031
1031 exchanges can be confusing for the uninitiated. That’s why it’s always a good idea to work with a qualified intermediary when embarking on an exchange of real estate. At CPEC1031 our intermediaries have twenty years of experience helping taxpayers defer capital gains taxes when selling real property. Contact us today to learn more about the benefits of a 1031 exchange and how we can help you through the process. You can reach us at our primary office located in downtown Minneapolis.
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.
© 2020 Copyright Jeffrey R. Peterson All Rights Reserved