- Use 100% of the funds from the sale of the relinquished property to purchase a replacement property.
- Postpone or potentially eliminate taxes due on your current sale.
- Exchange as many times as you’d like.
- Know the facts. Sometimes an exchange may not be the most profitable option. An Exchange Attorney can help you decide whether a 1031 Exchange is right for your individual situation.
An institutional investor wants to sell his apartment complex in Illinois (currently valued at $16,500,000) and purchase an office building in California. If the original purchase price of the apartment complex is $10,000,000, the investor would have to pay roughly $2,275,000 in capital gains tax on the $6,500,000 gain recognized from the sale. By deferring his taxes through a 1031 exchange, the investor is able to postpone the capital gains tax and use 100% of his proceeds from the sale of their apartment complex in Illinois towards the purchase of the office building in California.
|Sale of Apartment Complex||$16,500,000||$16,500,000|
|Original Purchase Price||$10,000,000||$10,000,000|
|Capital Gains Tax||$2,275,000||0|
|Tax Deferral Savings||0||$2,275,000|
|Cash Available for Reinvestment||$14,225,000||$16,500,000|