There are several good reasons why you should consider taking advantage of a 1031 exchange, but before you actually give it some serious thought, you also must understand that many factors have to be looked at as well. If you are one of those thousands of businessmen who have recently been disappointed by the lack of profit on an investment property you put your money in or if you simply want something new, then you probably are already aware that the upgrade or switch to a different property is very possible. Sadly though, there are just way too many things and requirements to fulfill in order to do that.
Since there are so many different things to factor in, most notably the tax requirements and the technicalities of closing the sale, it only means one thing: you have to be prepared for all of it. Fortunately for you, there are a sensible means of taking care of the tax situation. What we’re talking about is the sale and purchase of a property as a 1031 exchange. Now if you aren’t aware of this option, then you must continue reading the reasons below on why you should consider it.
1 – You won’t need to pay the capital gain taxes on the sale.
The Path To Finding Better Taxes
One of the main reasons why most people don’t really want to sell their old investment property and purchase a new one is because they know they could get stuck in paying the taxes and fees as a result of the sale. The good news about the 1031 exchange program is that it allows you to skip the burden of having to pay taxes and still successfully switch to a different investment property with equal value.
Figuring Out Resources
2 – You have the luxury to choose from a wide range of options.
Another important advantage of a 1031 exchange, which in turn should be enough reason for you to consider it, is that it gives you so many different ways on how to conduct it. The most common options include selling your old investment property and finding another one within a prescribed period or what is referred to as delayed exchange, the one in which you buy a new property first before you sell your old one or reverse exchange, and trading your property with another property on the same day or simultaneous exchange.
3 – It is easier to handle and deal with.
Finally, you have to understand that there is nothing illegal about conducting a 1031 exchange because it essentially offers you the better and more sensible option of buying an investment property and taking full advantage of the tax deferral program.