Are you in a position to take advantage of a little known tax loop called a 1031 Exchange? If you are an real estate investor and have an investment property you are interested in selling then a 1031 Exchange may be right for you.
Under Section 1031 of the U.S. IRS code, an investor may defer capital gains and/or losses due because of the sale of an investment property and thus defer any taxes owed.
By using this code to defer the taxes due, it gives a real estate investor to opportunity to reinvest those funds into another property. I have provided you an example below that shows how you, as an investor, would have 21 percent more earnings to reinvest and grow over the life of the investment than if you paid the taxes up front.
As a legal long-term option, you may want to make qualifying 1031 exchanges over your lifetime. Once you pass, your heirs receive an accounting of the market value of the home at the time of your death and may be able to avoid taxes based on how your estate is passed.
For details on a 1031 Exchange refer to IRS publication 544. There are time limitations and restrictions on the types of properties you can exchange. I suggest that before you begin this process, enlist the services of a real estate agent experienced in investment property sales and seek advice from a tax advisor or CPA. Being experience in this area, I can show you a list of Fairfax homes for sale that would meet the criteria of a 1031 Exchange.
