What is a 1031 Exchange?

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Are you looking to invest in a horse property? You may be able to obtain one with a 1031 exchange. A 1031 exchange is a swap of one investment property for another. Most swaps are taxable as sales, although if yours meets the requirements of 1031, then you’ll either have no tax or limited tax due at the time of the exchange. Continue reading for more information. Also, if you are looking for a horse property for sale in Colorado, contact Colorado Horse Property today and speak with one of our horse-person realtors.

How to Use A 1031 Exchange

1031 exchanges have several nuances, but looking at it broadly this is what it entails. You can change the form of your investment without cashing out or recognizing a capital gain. That allows your investment to continue to grow tax deferred. Also, there’s no limit on how frequently you can do a 1031 exchange. You can roll over the gain from one piece of investment real estate to another, and another, and another. Although you may have a profit on each swap, you avoid paying tax until you sell for cash many years later.

This is why you’d want to use this type of investment exchange. If it works out as planned, you’ll pay only one tax at a long-term capital gains rate. To qualify, most exchanges must merely be of like-kind—an enigmatic phrase that doesn’t mean what you think it means. You can exchange an apartment building for raw land, or a ranch for a strip mall. The rules are surprisingly liberal. You can even exchange one business for another. However, if you are planning on staying up for a while then this strategy is not for you. Talk to your financial advisor to see if a 1031 exchange is right for you.

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