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Trade
this Condo...
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for this Retail
Arcade...
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or for these
Waterfront Rentals...
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and have all
Taxes Deferred!
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The Power of Tax
Deferred Exchanges
Exchange
Don't Sell
The 1031 exchange process encourages
investors to use leveraging to acquire real estate worth many times the
amount of their initial investment. To understand the power of leveraging,
consider that ten percent appreciation converts to a 50% return on a property
where a 20% down payment is given.
For example, assume that
an investor sells a fully depreciated property realizing a capital gain
of $200,000. This gain is subject to federal and state taxes which when
combined could easily reach 35%.
$200,000 x 35% = $70,000
If the investor "sold" property
which is fully depreciated for $200,000 there would be a gain of $200,000
with the potential for $70,000 in taxes to be paid. This leaves only $130,000
left to reinvest. The investor that "exchanges" property will have the
entire $200,000 available to reinvest.
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Sale
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Exchange
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| Proceeds |
$200,000
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$200,000
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| Tax
Owed |
-70,000
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0
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| Cash
to reinvest |
$130,000
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$200,000
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If each investor replaced
the property with 20% down, they could reinvest in property worth:
Value (new Property)
$650,000 $1,000,000
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"Anyone may so arrange
his affairs that his taxes shall be as low as possible... for nobody owes
any public duty to pay more than the law demands."
Judge
Learned Hand
American
Jurist |
239-403-0605
239-263-7083 - FAX
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