Should I Do a 1031 Tax Deferred Exchange?
You may be asking, “should i do a 1031 tax deferred exchange?”
We’ve got this question from a person who owns a property out of state in another resort town, but it's much further from her home. Thus, it's actually double the distance from her home to the current property she owns versys what it would be here in our resort market.
The simple fact is that she has owned it for 25 years and has a $200,000 of equity in that home. When she sells that home, she could end up paying a fair amount of money in capital gains tax. But by doing a 1031 tax deferred exchange, she can sell that home, roll the hundreds of thousands of dollars of equity into a new purchase here in our resort market, and defer the capital gains to the new property.
This means that she's not going to have to pay the capital gains tax on the sale of the property in a location that's farther away.
By doing this, you can do it legally through what is called a 1031 tax deferred exchange which is essentially deferring the capital gains down the road.