Tax Deferred Exchanges
exchange” refers to Section 1031 of the Internal
Revenue Code. A 1031 exchange, otherwise known as a
tax deferred exchange is a simple strategy and method
for selling one property, that's qualified, and then
proceeding with an acquisition of another property (also
qualified) within a specific time frame. The logistics
and process of selling a property and then buying another
property are practically identical to any standardized
sale and buying situation, a "1031 exchange"
is unique because the entire transaction is treated
as an exchange and not just as a simple sale. It is
this difference between "exchanging" and not
simply buying and selling which, in the end, allows
the taxpayer(s) to qualify for a deferred gain treatment.
So to say it in simple terms, sales are taxable with
the IRS and 1031 exchanges are not. (US CODE: Title
26, §1031. Exchange of Property Held for Productive
Use or Investment).
If you are an investor and have questions about tax
deferred exchanges, contact Coleman & Coleman, PLC
for a consultation.