IN A SECTION 1031 EXCHANGE, UNCLE SAM IS YOUR PARTNER!!

Recently, one of Liberty  1031 Exchange Services' 1031 Business Development Consultants (BDC) described to me how he explains a Section 1031 tax deferred exchange to an investor who has no knowledge on the subject matter.  He starts out by saying, "Let me tell you about a real estate investment partner that I know of...he offers no monthly payments and he charges no interest, so you get an interest free loan. There is no balloon date or call date on this interest free loan.  In fact, he might not even require that you pay him back.....His name is UNCLE SAM!!!”

Our BDC, is correct because in a Section 1031 tax deferred exchange, UNCLE SAM (our Federal Government) allows you to defer the capital gains tax on the sale of your investment property. The Qualified Intermediary receives the funds from the sale of the relinquished property and uses the proceeds to purchase the replacement property selected by the taxpayer.  In many cases, the taxpayer will own his or her exchanged investment property at the time of his or her demise and may not owe any estate taxes, thereby having deferred and finally escaped the payment of any tax on the profits.  UNCLE SAM can be a great partner if you play by his rules (Section 1031).