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Investors that own property individually or with a group of people can be subject to high capital taxes gain when the associates desire to sell. To avoid paying capital gain taxes the answer is a 1031 exchange (often referred to as a “Starker” exchange).
What you accomplish by this process is carrying over the capital gains from the owned property to the new property acquired with the proceeds of the sale of the former property. One of the rules for the exchange is that the transaction must be a like kind exchange (property).
What is most interesting is when the investor who is the owner of the property dies, his heirs will receive the property at the current market value at the time of death. Accumulated capital gains over the years on the properties are erased from capital gains tax considerations.
This is a choice that should be considered by property investors when contemplating disposing of rental property.
The involvement of an intermediary and the time limits for execution are a few of the technicalities that have to be applied.
Call us if this strategy is of interest to you.
(“Divine musique” Bronze by Joseline Laramee (Quebec). You can reach the artist at joselinelaramee@gmail.com)
