1031 Exchange Defined
You A 1031 Exchange is a transaction in which you, as Taxpayer / Property Owner, are allowed to sell one property and buy another without tax consequence. This transaction is authorized by Section 1031 of the IRS Code and is the best strategy for postponing the payment of capital gains tax that would ordinarily arise from the sale of real estate. You pay the tax for the transaction some time in the future, usually when the proeprty you bought have been sold. You are able to utilize 100% of the proceeds from the sale of your property ( known as Relinquished Property) to purchase a new property ( also referred to as Replacement Property). Basically, in a 1031 exchange transaction, you basically do not pay for the federal income tax. Do take note that it has its requirements and conditions..
Financial Leverage
Increase your available capital since the tax liability in this transaction is deffered.
Investment Flexibility
Replace older properties with new ones. Change your property types. Exchange multiple properties.