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What is a 1031 Exchange and Why Consider It?

There are loads of benefits you potentially can get when you take advantage of a 1031 exchange program, but at the same time, it’s a very complex process overall, which means you have to be putting in the effort to understand it a little more before you even consider it. 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. But the thing is it also cannot be denied that there are so many requirements to fulfill just to do this.

Considering the fact that there are so many requirements and factors to consider, most notably the tax considerations and the technicalities linked to closing the sale, the one thing you, therefore, must take care of is preparing yourself to go through all of it. The good news is that there is a very convenient and practical way to take care of the tax issue. This is through the sale and purchase of a property by way of 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.
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The primary reason why you’re not even seriously contemplating the sale of your old investment so that you can buy a new one is because you’re aware of the fact that you will be forced to pay the taxes and fees as a result of the sale. But by availing the 1031 exchange program, you can actually make a successful switch to a different property but with the same value, but this time, there no longer is a need to burden yourself with the usual taxes you need to pay.
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2 – You get to choose from several different 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. Today, the three most common options are simultaneous exchange in which you trade your property with another property on the same day, delayed exchange or when you sell your old property and find another within a specific amount of time, and reverse exchange, in which you buy a new property and then sell your old one later.

3 – It is easier to handle and deal with.

Lastly, it’s not really just about avoiding the taxes, but more on realizing that there’s actually an easier way to buy an investment property and at the same time taking advantage of the tax deferral program.