Section 1031 Like-Kind Exchange and Estate Planning
A taxpayer and their heirs can benefit greatly from a 1031 Exchange when selling business- or investment-use real estate:
- Pay no tax at the time of selling the property, which allows for maximum reinvestment buying power.
- Reinvest in other business- or investment-use property in order generate/replace monthly income; with an eye on appreciation, diversification and/or consolidation.
- Active investments such as single- or multi-family rentals, commercial or industrial properties
- Passive investments such as raw land, or Delaware Statutory Trust fractional ownership properties
- The taxpayer’s heir or heirs inherit the replacement property with stepped-up basis, meaning that the value of the property is reset to the prevailing market price at the time of the trust owner’s death. In this case the 1031 Exchange tax deferral becomes permanent tax forgiveness!
- Under current tax law, each decedent may gift up to $11 million before an inheritance tax is assessed on the estate.
If a taxpayer is unsure of the benefits of a 1031 Exchange or of whether or not it makes sense for their financial situation, we strongly recommend they consult with their tax, legal and/or financial planning professionals before selling real estate. We are happy to speak with anyone involved regarding Section 1031 benefits, requirements and processes. Give us a call at 303.789.1031
The Exchange Resource Group Team