Old age is a time for reflection and not to work yourself to death trying to save taxes. But that is if the taxmen allow you to do so. Often they are busy holding you by the scruff of your neck and trying to wheedle out every last bit of money. While this is exaggeration, I don’t think I’m widely off the mark when I say that like me, you too don’t like the taxman too much. Well so, if you want to avoid the gaze of a taxman when you plan to get yourself a retirement home, there is an easy way out.
And don’t worry, it is perfectly legal. You just have to indulge in some good old barter. Confused? Well, at the end of the day, isn’t 1031 exchange a form of barter where you exchange one property for another? The only difference is that you end up deferring your capital-gains taxes on the property you’ve given up. But you must follow the IRS’s strict rules and establish that your original intention was to use the new property for investment, not as your residence. That’s why having a tenant with a lease is a good idea.