1031 Tax Free Sale of Real Estate

The 1031 exchange is one of the best tools available for real estate investors.

Here's a list of a few powerful advantages of real estate Options.

  • Options give the highest leverage for a minimum investment. Typical leverage is 25 to 50 times the money invested.
  • They are invisible, portable, exchangeable, not attachable and are private. They can be held in a personal property trust for privacy and safety.
  • Can be used for property, notes, sales contracts, personal property, leases and more. Investors can option properties they don’t want, but they know an investor who does.
  • Minimum risk. Lead based paint, radon, EPA, sinkholes, flood, down-zone, etc. The maximum loss is the money invested to purchase the option.
  • Lowest cost of funds. The benefits of buy down, appreciation, depreciation and credits for each month of the option increases in value over the life of the option.
  • Can depreciate property without ownership. An option holder can receive the depreciation and other tax credits if he becomes the equitable title holder.
  • Upon a sale, the optionee can do a 1031 exchange without ever owning the property according to the IRS tax code because he is the equitable title holder.
  • Many exit choices: sell, seller finance, wraparound, lease, exchange are available to the option holder or assigns.

Under Section 1031 of the U.S. Internal Revenue Code (26 U.S.C. § 1031), a taxpayer may defer recognition of capital gains and related federal income tax liability on the exchange of certain types of property. Before 2018, a wide array of property was covered by the deferment; but the Tax Cuts and Jobs Act of 2017 repealed Section 1031 for all types of property EXCEPT real property.

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Advantages Of Real Estate Options

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