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November 25, 2004 06:15 AM

Exchanging Real Estate Tax Free


Excerpt: No one likes writing Uncle Sam large checks. Yet many people needlessly send Uncle 15% of their profit when they sell a rental house or land. There is a simple way to avoid it. It’s called a 1031 exchange and it can keep you from losing tens or hundreds of thousands of dollars in unnecessary taxes and loss of growth. “Guarding Your Wealth” is a nationally syndicated weekly personal finance column written by Jeffrey D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group, a private wealth management firm that employs sophisticated proprietary strategies designed to protect and grow its clients' investments.


No one likes writing Uncle Sam large checks. Yet many people needlessly send Uncle 15% of their profit when they sell a rental house or land. There is a simple way to avoid it. It’s called a 1031 exchange and it can keep you from losing tens or hundreds of thousands of dollars in unnecessary taxes and loss of growth.

The 1031 exchange is named after section 1031 of the IRS tax code. Basically, it allows you to exchange an existing investment property for a different investment property without having to pay capital gains taxes on the transaction. This applies to any investment property including rental houses, raw land, business property, commercial real estate, condos, apartments, etc.

You can roll the profit from the sale of an existing property into the purchase of the next. Not only does this save you from having to pay capital gains taxes in the short-term, it can also preserve the ability of appreciated property to receive a step-up in basis at death which can eliminate those taxes altogether.

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Read all 22 posts in the same category of Home and Mortgage:

A New Way to Hedge Your Home's Paper Profit - Dec 12, 2004
California, U.S. in a Housing 'Bubble,' UCLA Forecast Says - Dec 11, 2004
21st-Century Landlords - Dec 10, 2004
Get Real About Real Estate - Dec 09, 2004
Can There Be Too Many Homeowners? - Dec 06, 2004
Selling Your Home - Dec 06, 2004
Conforming Mortgage Loan Limits Rise For 2005 - Dec 04, 2004
12 Tips For Wise Use Of Equity - Dec 01, 2004
Housing Wealth Reverberates - Nov 30, 2004
More Mortgages To Be 'Conforming' - Nov 30, 2004
Realtors Engage In Turf Battle With Discounters - Nov 28, 2004
Expanding The American Dream Commitment - Nov 26, 2004
'Tis the Season to Fix Up Your House - Nov 26, 2004
Sell Your Home — Fast - Nov 26, 2004
Most Expensive Gated Communities In America 2004 - Nov 26, 2004
Home Equity For The Holidays? OK, With Caution. - Nov 25, 2004
Does It Pay To Save? - Nov 23, 2004
The High Earner/Poor Saver - Nov 20, 2004
Six-Figure Zip Codes - Nov 20, 2004
Buyer's Home Feature Preferences Reflect Lifestyles - Nov 16, 2004
Pattern of Strong Home-Price Gains Continues in Most Metro Areas - Nov 16, 2004