Property investments are not fluid. Unlike publicly listed stocks, which are traded daily, real property can take months to sell.
But there is another way to improve portfolio positions for real property, and that is through Section 1031 exchange. If you want to take advantage of IRS Section 1031, you should consider 1031 Exchange Place, which specializes in property exchanges.
Business use only
When you have a business, and you are selling an asset in order to buy another asset of like-kind, then you can defer the capital gains on the sale. This applies to most capital assets but is most popular with real property.
The key to the provision is that the properties or equipment in question are used or owned by a business. Private individuals do not qualify for Section 1031. Another thing to consider is that the equipment or property should be of “like-kind.”
You can sell an office building, and use the proceeds to buy another office building in a different place. This “swap” of properties qualifies for Section 1031.
There are other considerations for availing Section 1031. The buyer can do a swap, and then swap multiple times again, and would pay capital gains taxes only once. This can save the owner up to 39.6% of the profits from the sale of building or property.
There is also a provision that allows for depreciation recapture. With this, up to 25% is saved on the property or equipment depreciation.
There are, however, some issues with implementation, and not all properties can be included in the filing for Section 1031. A business would need a consultant who is an expert in like-kind exchanges to better understand and how to use this deferment.