| You can cut the capital gains tax out of a real estate | | | | equal to or more than the net profits from the selling of |
| sale with the use of Exchange 1031. Exchange 1031 | | | | your property. |
| provides that if you are going to use proceeds of the | | | | The full equity realized from the sale of your property |
| sale of a real estate property to purchase additional | | | | must be used to purchase the "replacement" property. |
| property, you can avoid paying the capital gains tax. | | | | If the replacement property you purchase under an |
| The idea is to bolster real estate sales by allowing | | | | Exchange 1031 provision turns out to be of lesser |
| taxpayers to waive this tax on your property sale if | | | | value than the property you sold, you will be liable to |
| the main purpose of the sale is to purchase another | | | | pay an accrued tax. The amount of your tax liability will |
| property. This provision gives an incentive for both the | | | | be determined by the amount the replacement |
| buying and selling of property. | | | | property fell short of the full equity of the sold property. |
| Capital gains taxes assessed in the sale of real estate | | | | In other words, the amount of tax liability you incur will |
| are estimated at around 20%-30%. If a taxpayer is | | | | depend upon your given situation and the amount of |
| engaged in a "like kind" real estate purchase, the tax | | | | full equity you realized after the sale of your property. |
| reduces his ability to purchase a similar property by | | | | Therefore, part of the tax is deferred in this instance, |
| effectively cutting the resale value of their property by | | | | rather than deferring all of the capital gains tax. |
| 20%-30%. This, in turn, will reduce the amount of | | | | The hope of this provision is that such a substantial tax |
| money that they are likely to spend on a "like kind" | | | | savings will encourage real estate sellers to purchase |
| purchase of another property. | | | | "replacement" property rather than invest the income |
| There, of course, are conditions to deferment of | | | | from such a sale of real estate into some other |
| capital gains tax under Exchange 1031. | | | | venture. It is a good provision for people looking to "buy |
| The value of the property you are purchasing with the | | | | up" in the housing market. |
| proceeds from the sale of your property must be | | | | |