Taxpayers and investors have many questions about 1031 exchanges, and we’ve heard them all. One question we got recently was: “why is it called a 1031 exchange?” In this article, we are going to dive into the history of 1031 exchanges and explain why exactly they’re called 1031 exchanges.
Section 1031 of the IRC
The simple answer to the question at hand is that 1031 exchanges were created and continue to be governed by section 1031 of the Internal Revenue Code. The Revenue Act of 1921 was the first time 1031 exchanges were written into law. Since then, there have been numerous changes to how 1031 exchanges can be conducted (the 1979 Starker decision, and the 2018 Tax Cuts & Jobs Act being some of the bigger changes). However, 1031 exchanges have remained an excellent tool for tax deferral.
It’s important to clarify that 1031 exchanges are sometimes referred to as like-kind exchanges. This is more of a colloquial term that comes from the fact that all property involved in a 1031 exchange must be like-kind.
1031 Exchange – A Tool for Tax Deferral
A 1031 exchange is an excellent tool for tax deferral. Take your sales proceeds when selling investment real estate and roll them into a continued investment replacement property. When done correctly, you can defer your capital gains taxes on the sale and keep your money working for you in a continued investment property. Many US taxpayers have availed themselves of the benefits of section 1031 of the Internal Revenue Code and you can too! Contact a qualified intermediary at CPEC1031, LLC today to learn more about the process of conducting a 1031 exchange.
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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