H. Glenn McDonald

1031 Exchange

DefinitionsFAQ'sTips for Success

Are you exploring your property investment options? Before purchasing or selling property, you should always consider the tax implications. Section 1031 of the Internal Revenue Code allows investors to defer the payment of taxes on the proceeds of sales by exchanging investment properties of "like-kind" - that is, properties held for investment or for productive use in a trade or business.

Maximize your profit, not your taxes. Here's how:

If you have taken depreciation on an investment property, or if you have a property that has increased in value, you may face substantial capital gains taxes. Section 1031 allows you to defer the tax by exchanging the piece of property for another, provided both parcels are either used in a trade or business, or held as investments.

  Industrial   Apartments   Farms/Ranches  
    \ | /    
Raw Land ------------------------- LIKE KIND ------------------------ Commercial
    / | \    
  Office Buildings  



  Retail Properties  

The tax-deferred exchange preserves the net proceeds. You can then reinvest the money and continue to realize returns instead of losing a significant portion of the profits to taxes.

  Sale Exchange
Proceeds $100,000 $100,000
Estimated State and Federal Taxes (30%) $30,000 $0
Proceeds available for reinvestment $70,000 $100,000

If you've invested in property, or plan to invest, a 1031 exchange allows you to put your profits to work. Contact Glenn McDonald for more information.