A 1031 exchange can be an excellent tool for building wealth over the long term. In this article, we are going to discuss how a 1031 exchange can help you compound wealth over time.
A Typical Sale
In a typical sale of real estate, the seller is responsible for paying capital gains taxes on the net proceeds from the sale. Depending on the value of the property, this can be a sizable tax bill that the seller has to bite the bullet on. Sometimes this potential capital gains tax bill is so high it can discourage property owners from selling.
The 1031 Exchange Alternative
Section 1031 of the Internal Revenue Code provides an excellent, tax-advantageous alternative to selling property outright. In a 1031 exchange, the seller does not keep their net proceeds. Instead, they reinvest those net proceeds into a new replacement property that is higher in value, equity, and debt compared to their relinquished property. When done correctly, the taxpayer is able to defer their capital gains taxes on the sale.
This allows you to avoid a potentially huge tax windfall and also keep your money working for you – compounding interest over time in your new replacement property investment.
Your One-Stop Shop for All Things 1031 Exchange
At Commercial Partners Exchange Company, we provide comprehensive 1031 exchange solutions to all of our clients. With twenty years of experience under our belt, you can trust us with the facilitation of your like-kind exchange. Our qualified intermediaries can prepare all of your necessary documentation, advise you on replacement properties, and answer all of your questions. Contact us today to learn more about the 1031 exchange process and to get your like-kind exchange off the ground. You can find us at our main office in downtown Minneapolis.