1031 exchanges can prove very useful. Every day, real estate investors exchange out of investment or business properties for "like-kind" properties while deferring capital gains – all thanks to Internal Revenue Code Section 1031. The exchanger, of course, is restricted from immediately getting the sale proceeds; they go into an escrow fund maintained by a qualified intermediary. (If you take control of the proceeds, you have a sale, not a like-kind exchange.)1,2
However, 1031 exchanges sometimes fail. A suitable
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