Internal Revenue Code 1031

If a real estate investor wants to make use of the Internal Revenue Code 1031 but thinks that it is only available to an investor with a multi-million dollar property, they would be mistaken. The 1031 exchange is perhaps the most powerful tool that an investor has available to them if they want to sell their property and even get out of any type of property management as well.

The 1031 real estate exchange is so powerful because is available to all investors, regardless of the size of their holdings, as long as the property has been used for investment or business purposes. No matter whether you are interested in selling undeveloped land, a multi-family dwelling, a strip mall or hotel property, the 1031 is a great tool to use for deferring non-recaptured depreciation and capital gains.

Often times an investor will chase market appreciation, yet they need to realize that any investment only makes sense if it can produce enough of a cash flow. In order to give yourself the ability to redirect investments without incurring capital gains taxes, you need to take advantage of the Internal Revenue Code 1031. You will be doing yourself a big favor, especially in a tenuous market.

One of the biggest developments in the section 1031 exchange is the variety of replacement property choices that now exist. Originally, investors were limited to locating new property that would carry pretty much the same headaches as their old property; however, IRS procedure 2002-22 codified TIC exchange (tenant-in-common) and this was basically the birth of a new real estate industry.

Naturally, many real estate investors become fed up with having to deal with hands-on management, with all of the capital improvements necessary and the increasing operating costs, thus making the Internal Revenue Code 1031 a perfect solution to a great real estate exit plan. Older investors are looking for income streams, and now they can sell their properties under a 1031 exchange and obtain TIC interest. This turns the management aspect along with the profit and loss statement over to a group of experts and the investor receives a steady income stream. This also allows them to exchange their property and later turn it into their primary residence all without worrying about capital gains.

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