1031 Tax Exchange- The Secret of Successful Business

2007-05-04 12:17:49

( Financial )



1031 tax exchange refers to a section of the Internal Revenue Code, which pertains specifically for real estate. Tax deferred exchanges, as they are more commonly known can be used by individuals for a number of purposes. First, it could be applied towards the conversion of idle land into income producing properties that could bring in some additional cash flow for you. Similarly, 1031 tax exchange can also be used in trading and selling properties as well as rebuilding your equity.

Here is the secret of 1031 tax exchange and it will surely help you in saving on all those income taxes incurred from selling properties. What you have to do is list the sale of the property as a trade or an exchange, meaning you will have to buy a new property to swap with the one that you have just sold. When you do this, then you will be exempt from paying all those income taxes that eat into your profits and savings.

Some people spend their lives simply buying and selling properties after having found out about 1031 tax. However, there are still some lookouts that you need to know before checking out the property market. First, you will need to make adjustments on the depreciation schedule, which needs to be much lower than on regular properties. Second, you will not be able to make deductions on losses from income tax once you have started trading properties.

You can double check this fact, everything will be legal and allowed by the government. Another thing to keep in mind is that this law only involves trade or business related properties. You cannot use your home or other personal properties for this same purpose. However, the kind of property will not be questioned—it could be office space, a warehouse or a factory, even a commercial area.


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