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Deferring Capital Gains Taxes
The tax-deferred exchange provides real estate owners with an option to defer tax on the sale of investment and business property. Most taxpayers are aware that they can exclude the gain on a sale of their personal house. Many business and investment property owners fail to capitalize on the benefits of another type of tax-deferred exchange under IRC Section 1031. IRC Section 1031 states that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business.
The rule will remain same in an investment if such property is exchanged for another property of like kind. Although the 1031 tax code section is flexible, various modifications have been made over the years that have imposed additional restrictions. The new capital gains tax rate of 15 percent, lowered from the previous 28 percent rate.
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