| 1031 Tax Exchange Program
Commercial Realty Services of Alabama, LLC is a significant force
in facilitating 1031 Exchange transactions. Our long-term relationship with
owners and investors of every major property type allows us to match properties
and exchange buyers with speed and efficiency.
A 1031 Tax Deferred Exchange allows you to
roll-over all of the proceeds received from the sale of an
investment property into the purchase of one or more other
like-kind investment properties. At closing, proceeds are
transferred to a third party--called a facilitator or
qualified intermediary--who holds them until they are used
acquire the new property.
Capital gains taxes are deferred if all of
the exchange funds are used to purchase like-kind investment
property.
The deferment is like getting an
interest-free loan on the tax dollars you would have
owed for a cash sale. More equity is retained, and that
helps you move into properties of higher value each time
you perform a 1031 Exchange.
Who is a 1031 Exchange for:
Anyone who is considering selling real
estate should consider
affecting a 1031 Exchanges. An Exchange offers the
astute investor an opportunity to reinvest the federal
capital gains that would normally be handed over to the
IRS and put that money to work for himself. You work too
hard to simply pay the tax without carefully considering
this reinvestment option. Essentially, 1031 Exchanges
should be thought of as an interest free loan from the
IRS; one in which the principal may be increased through
subsequent exchanges and may never require repayment, if
you plan properly.
ADVANTAGES
OF EXCHANGING
1. The 1031
Exchanger will have more buying power because the federal
income taxes are deferred. This will enable him to leverage
himself up greater than he could have paid the tax
liability. The additional equity to reinvest will make him a
more solid buyer and help him get easier financing.
2.
Investors can do exchange after exchange to create a
pyramiding effect. This tax liability is forgiven upon the
death of the investor as the heirs get a stepped up basis on
the inherited property.
3. The
Exchanger will have greater selling power because he does
not have to inflate the sales price to try to cover some of
the capital gains that would normally be due upon the sale
of an investment property. It will enable him to be more
flexible with the selling price.
4. The
Exchanger can acquire a replacement property with greater
income potential. He can sell raw land and acquire
income-producing property. Perhaps, he wants to acquire a
building with additional units or in an easier to rent
location.
5. The
Exchanger has the opportunity to consolidate several hard to
manage properties in one easy to manage property or
diversify several small properties into one large property.
It provides an excellent opportunity to relocate or expand a
current business or investment.
6. An
exchange can also help an investor acquire a less management
intense property.
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