1031 Exchange

The Benefits

How can a 1031 Exchange help clients?
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What is a 1031 Exchange?

Section 1031 of the Internal Revenue Code provides a strategy for deferring the capital gains tax that may arise from the sale of a business or investment real property. By exchanging real property for like-kind real estate, real property owners may defer Federal tax obligations and apply all the proceeds toward the purchase of replacement property.
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Benefits of a 1031 Exchange

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Tax Deferral

Internal Revenue Code Section 1031 states: 
“No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like-kind which is to be held either for productive use in a trade or business or for investment.”

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Diversification

Much like you’ve worked with clients to diversify their investments, a 1031 exchange allows clients the ability to do the same with their real estate investments. An example would be a client exchanging assets from the sale of an office building in a struggling northeastern city for a more balanced portfolio with three different retail properties in Colorado, Arizona and Texas.

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Potential Source of New Income

Many investors hold real estate for the purpose of generating income. As certain properties age or economic conditions change, it may be beneficial for clients to exchange properties with diminishing income for other real estate that offers greater income potential. Also, clients may have real estate like an unused piece of land which generates no cash flow. A 1031 exchange allows them the opportunity to exchange a non-cash flowing investment for another property that does generate cash flow.

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Improved Purchasing Power

By taking advantage of the tax-deferral benefit of a 1031 exchange, clients can put more money to work – money they would have been required to pay to the IRS in taxes – and purchase replacement properties of higher value.

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Reprieve for Landlords

Clients owning multiple rental properties know too well the headaches that go along with these investments. Maintenance, property improvements and disgruntled tenants seem to be part of daily life. These owners can eliminate the time and hassle of property management by exchanging into other real estate assets where they have none of these responsibilities.

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This website includes a brief and general description of certain 1031 guidelines, and is not intended as tax advice.

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Terms and Policies

This website is neither an offer to sell nor a solicitation of an offer to buy any security which can be made only by a prospectus, or offering memorandum, which has been filed or registered with appropriate state and federal regulatory agencies, and sold only by broker dealers and registered investment advisors authorized to do so.

The Inland name and logo are registered trademarks being used under license. "Inland" refers to The Inland Real Estate Group of Companies, Inc. which is comprised of a group of independent legal entities some of which may be affiliates, share some common ownership or have been sponsored and managed by such entities or subsidiaries thereof including the Inland Real Estate Investment Corporation (Inland Investments) and Inland Securities Corporation. Inland Securities Corporation, member FINRA/SIPC, is dealer manager and placement agent for programs sponsored by Inland Investments and Inland Private Capital, respectively. For more information on Inland Securities Corporation, visit FINRA BrokerCheck.

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