1031 is defined under section 1031 of Internal Revenue Code section. It is a set of approved procedures for tax-deferred exchanges. There are many subjects that are covered under 1031 exchange, but here I just want to touch upon the plus and the minus points of this exchange.
Firstly, the plus point: 1031 exchange enables a taxpayer to sell a piece of property or investment and replace it with like kind or similar kind of property. Under these regulations, tax deferred exchanges have become easier and safer than ever before.
Secondly, the negative aspect of this exchange is the reduced basis for depreciation. Moreover, in future, if the taxpayer cashes out his investment, the replacement property will include deferred gain, which will be taxable.
These are just few point to plus your information and minus away the myths about 1031 exchange.
So, some more next time!