1031 Exchange (TIC)

Section 1031 of the Internal Revenue Code provides that the Federal capital gains taxes are deferred when equity from the sale of a commercial property is exchanged into a new commercial property. By completing a 1031 Exchange in the proper manner, an investor (Exchanger) can dispose of a commercial property, use all of the equity to acquire a replacement investment property, defer the capital gain tax that would ordinarily be paid and then leverage all of the equity into a replacement property.

Two requirements must be met to defer the capital gain tax: the Exchanger must acquire “like kind” replacement property and the Exchanger cannot receive cash or other benefits. To do so would cause the Exchanger to pay capital gain taxes on the money or benefits not reinvested.

An investor can achieve a number of investment objectives with an Exchange:

• Lower Taxes on Cash Flow
• Defer Taxes on Gain
• Reducing Day-to-Day Management
• Income Shelter through Depreciation
• Releasing "Trapped" Equity