A few years ago, many people were seeing their real estate investments appreciate at incredible rates, and in turn, were doing 1031 tax-deferred exchanges to defer their capital gains liabilities into new investment properties. But in today’s market, many investors see limited or no appreciation in their investment property. In times like this, does it make sense for an investor to sell their property and do a 1031 exchange?
In many cases, the answer is “yes.”
With almost all real estate sales involving improved property, there is the recapture of depreciation to consider. Section 1250 of the Internal Revenue Code requires that depreciation be recaptured at the current rate of 25%, which is higher than the current long-term capital gains rate. For this reason, the ability to defer the recapture of depreciation may make a 1031 exchange very attractive.
There are even more reasons to consider doing a 1031 tax-deferred exchange in a down market:
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Portfolio diversification (i.e., selling one larger property to acquire numerous smaller properties at today’s prices) or relocating investment properties to another area of the country with faster appreciation,
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Exchange raw land which produces no income for an improved property which can be rented to create positive cash flow,
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Exchange into a property that can be used professionally. For example, selling a single-family rental property and purchasing a new property that can accommodate your business, or
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Exchange from fully depreciated property into to a higher valued property that can be depreciated further.
The value of a 1031 Exchange is considerable, even in today’s market. Leveraging the cash that would otherwise be forfeited in capital gains taxes and/or depreciation recapture makes sense in any market and a 1031 Exchange is the vehicle to get it done.
For specific information about the tax ramifications of a 1031 Exchange, please contact your tax professional. For more information about how a 1031 Exchange can benefit you in various ways contact the author of this article, Carmine DiFulvio, of First American Exchange Company at 800-337-1031.
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Tags: 1031 Exchanges, Carmine DiFulvio, Denver Colorado Real Estate, Investing, Perry & Co, Real Estate
The following quotes have been used in the Perry & Co. Real Estate Professionals Weekly Denver Realtor Sales Meeting Agendas. They are included in the weekly agenda in order to motivate company real estate agents and also illustrate the current economic situation in real estate. They are presented together here in chronological order beginning January 4, 2012.
Click here to see other year’s Motivational Quotes For Realtors.
“What’s gonna work? Team work. What’s gonna work? Team work!” – Wonder Pets
“Success in real estate starts with believing you’re worthy of it.” – Matthew Ferrara
“You cannot live a perfect day without doing something for someone who will never be able to repay you.” – John Wooden, Basketball Coach
“When I thought I couldn’t go on, I forced myself to keep going. My success is based on persistence, not luck.” – Estee Lauder
“Who on earth do you think you are? A superstar? Well, right you are!” – John Lennon, Instant Karma
“Caring, it turns out, is a competitive advantage, and one that takes effort, not money.” – Seth Godin
“To sow your future sales, you must work the harvest in multiple stages: fertilizing, seeding, nurturing and cultivating your future bounty.” – Matthew Ferrara
“If you make a commitment to do what is required to be successful, you will eventually become addicted to the success and then the pain of doing what is required will actually become something you thrive on.” – Tom Tognoli, Intero Real Estate
“If you make a sale, you can make a living. If you make an investment of time and good service in a customer, you can make a fortune.” – Jim Rohn
“Each of us defines for ourselves what it means to be more successful.” – Spencer Johnson, MD
“Relationships trump technology.” – J. Lennox Scott, CEO John L. Scott Real Estate
“Make time for play time.” – Jon Larrance, COO Perry & Co.
“It’s not good enough to have satisfied customers, you must have dazzled customers.” – Dean Lindsay
“Find a mentor and get mentored.” – Mickey Matteson, Worldwide ERC Member
“If we did all the things we are capable of we would astound ourselves.” – Thomas Edison
Click here to see other year’s Motivational Quotes For Realtors.
Filed under: Denver Colorado Real Estate, Information For Realtors, Leading Real Estate Companies | 2 Comments
Tags: Denver Colorado Real Estate, J. Lennox Scott, Jim Rohn, John Lennon, John Wooden, Jon Larrance, Leading Real Estate Companies of the World, Matthew Ferrara, Mickey Matteson, Motivational Quotes For Realtors, Perry & Co, Relocation, Seth Godin, Spencer Johnson, Thomas Edison, Tom Tognoli, Worldwide ERC