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IRC 1031 Exchange Explained


IRC 1031 Exchange Explained

The internal revenue code or IRC 1031 exchange is an effective tax deferral strategy available to taxpayers. This code allows for a rollover of equity of like rental properties, through an IRC 1031 exchange, to take place without requiring the payment of capital gains taxes on the initial investment. The theory behind internal revenue code is that when a property owner has reinvested the sale proceeds into another rental property, the economic gain has not been realized in a way that generates funds to pay any tax. In other words, the taxpayer's investment is still the same, only the form has changed (e. g. vacant land exchanged for apartment building). Therefore, it would be unfair to force the taxpayer to pay tax on a paper gain.

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