The Power of Tax Deferral
Section 1031 of the Internal Revenue Code allows investors to defer capital gains taxes and depreciation recapture taxes by reinvesting the proceeds from a sale into a new property. This allows for significantly more capital to be put to work in the new investment.
Key Requirements
- Like-Kind Property: Both properties must be held for use in a trade or business or for investment.
- Timeline: You have 45 days to identify replacement property and 180 days to close on it.
- Qualified Intermediary: You must use a third-party QI to hold the funds between the sale and the purchase.