What Is a 1031 Tax Deferred Exchange?

If you have real estate investments, you’ve probably heard of the term, but you may not have a full understanding of what this valuable tax-deferral move can accomplish for you or how it works. Read on for some key terms and tips.

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You’ve owned rental properties for years, and while they’ve been good to you, they have also been a lot of work. You’re ready for a change … one that doesn’t leave you with a big tax bill on the sale of your property. Enter the 1031 Tax Deferred Exchange.

Specifically, the tax code referring to 1031 exchange rules in IRC Section 1.1031 reads “No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.”

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Daniel Goodwin
Chief Investment Strategist, Provident Wealth Advisors

Daniel Goodwin is a Kiplinger's contributor on various financial planning topics and has also been featured in U.S. News and World Report, FOX 26 News, Business Management Daily and BankRate Inc. He is the author of the book Live Smart - Retire Rich and is the Masterclass Instructor of a 1031 DST Masterclass at www.Provident1031.com. Daniel regularly gives back to his community by serving as a mentor at the Sam Houston State University College of Business. He is the Chief Investment Strategist at Provident Wealth Advisors, a Registered Investment Advisory firm in The Woodlands, Texas. Daniel's professional licenses include Series 65, 6, 63 and 22. Daniel’s gift is making the complex simple and encouraging families to take actionable steps today to pursue their financial goals of tomorrow.