There are many ways to build an estate. One avenue is through investing in real estate. Careful consideration is given in selecting apartments, land, warehouses, and other types of investment properties. Likewise, the same consideration should be given when moving to another investment property. Unfortunately, many investors do not plan ahead. They will sell, pay taxes and then acquire other properties. Smart investors will take advantage of another method left to them: The tax deferred exchange.
The tax deferred exchange allows the investor to defer paying capital gains tax on their investment properties. Conversely, an investment property that is sold without a tax deferred exchange can force the seller to pay up to 28% of their gain in taxes! If an investor is looking to purchase other investment properties, then an exchange makes much more sense because there is now a larger amount of money available to purchase the replacement properties. An investor is able to use the money they would have paid in taxes and put it to work for them in another investment property.
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