It used to be that only people who worked on taxes needed to know about 1031 exchanges, but they are becoming more and more a mainstream conversation. Like-kind exchanges and Starker exchanges are referring to the same thing. Simply put, it is trading one business or type of investment for another one. Doing it as a normal sale and then buy will mean taxation on both purchases, but doing a 1031 exchange helps you to avoid that expense. Since you are just making a trade, there is no money that you have to be taxed. Only capital gains are taxed, so this doesn't qualify.


Doing a 1031 exchange for your investments will help it to grow faster because you will save money on the taxes. There is also no kind of limit on how many times or how often you can do this kind of trade. It is just up to you to decide how much you want to trade your investments. Each swap that you make, may give you a profit, but you can avoid the capital gains tax until you cash out. When you do decide to cash out, you will only have to pay the tax on the final investment, not all of the other ones that led up to it.


If this sounds appealing to you, there are some things you should know. Personal real estate is not included in your possibilities. This is only for investments and business property, so you can't use it for personal real estate. You may be able to use it to trade vacation homes, but this can be very tricky, so make sure that you understand it fully. You can't use it to get a new home to live in, but you may be able to do it with other items, like artwork.


You do have to trade items that are of a like-kind, but that is not as limiting as you may think. You may fall into a trap if you don't know the rules, but for the most part, you can exchange real estate for most other kinds of real estate. You can also exchange one kind of business for another. Starker exchanges refer to a specific type of 1031 exchange that is delayed. This just means that there is a third-party who holds on to the cash when you get rid of your property and then uses it later when there is something else you want. It is still considered a trade because you are never in contact with the money. To read more about these exchange 1031, click here.



To make sure it qualifies to be a 1031 exchange, you will need to follow some rules. When you sell your property, you can never come in contact with the cash. The third-party you hire is the only one that can hold on to it. It is not a delayed exchange if you don't designate a replacement property within 45 days of the property's sale. You have to tell them what you want to use that money for in writing. Three kinds of property can be designated in this way if you want to open up your possibilities. To learn more details regarding 1031 exchange, you check out http://www.huffingtonpost.com/phil-jemmett/pros-and-cons-of-a-1031-t_b_4415703.html.