This Is How a 1031 Exchange Helps You Build Wealth
The IRS provision increases your real estate purchasing power, but first you have to master the rules.
June 5, 2017 | by Kayleigh Kulp | U.S. News
Byron Smith Sr. has been investing in real estate for nearly 40 years, building wealth by using a 1031 exchange to defer taxes and acquire better, more profitable properties.
A recent exchange of a single-family property in northern Virginia for one with more growth potential in Richmond would have resulted in about $60,000 in state and federal capital gains taxes – that is, had the Vienna, Virginia-based attorney and real estate broker not enlisted the help of a qualified intermediary to transfer the equity from one investment to another under the popular IRS provision.
“The theory of a 1031 exchange is a continuity of investment liquidity. If you don’t sell the investment and cash out, you’re not really liquidating. You’re merely changing your type of investment,” says Scott Saunders, senior vice president of Asset Preservation in Colorado Springs, Colorado, which conducts 1031 exchanges for clients. “It gives you purchasing power throughout your lifetime.”
Blue Vault helps me to stay well informed on the financial status of both open and closed nontraded REITs and BDCs, so that I can help my clients better understand the product, before they make the decision to invest and after.