The most common reasons a taxpayer chooses a 1031 Exchange are financial leverage and strategic flexibility.
Financial Leverage
When the tax liability in a transaction is deferred, the taxpayer receives an increase in available capital. This capital can be applied to acquiring the replacement property. The taxpayer gains financial leverage through an exponential increase in cash flow and appreciation – which provides more buying power.
Strategic Flexibility
With a 1031 Exchange, the taxpayer can employ a number of tactics to increase investment flexibility, such as:
- Consolidating many properties into one for ease of management
- Diversifying one into many for ease of future divestment
- Relocating properties geographically to take advantage of trends
- Changing property types (for real estate exchanges only)
- Improving investment performance
- Adapting to changes in needs and abilities, and other life transitions
- Replacing older properties with newer ones
Successful exchanges start with expert answers to your questions. Contact us today to find out more about the benefits of participating in a Section 1031 Exchange.