Section 1031 of the Internal Revenue Code provides one of the few means by which the gain on property sold may be deferred to a later date. If certain conditions are met, the gain on the sale of real or personal property will not be taxable in the year of sale if the proceeds are reinvested in “like kind property” within certain time limit periods, but rather will be deferred until the newly acquired property is sold or otherwise transferred. This useful deferral feature allows for the entire proceeds of the sale property to be used to acquire new property. Without these provisions, the amount received on the sale of the old property would have to be reduced by the income taxes inherent in that property, resulting in less proceeds available for the acquisition of the new property.
We would be happy to consult with you on whether this procedure would be to your benefit as there are strict rules and limitations that must be applied. If, however, these rules and limitations fit your situation, this technique can be very useful to maximize your investment potential.