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1031 EXCHANGING YOUR BUSINESS PROPERTY

1031 exchange your business

Internal Revenue Code Section 1031 allows business owners to exchange their real estate for productive use in a trade or business for other like-kind investment or business-use property. No gain or loss will be recognized. Done correctly, business owners can defer their capital gains taxes, depreciation recapture taxes, and alternative minimum taxes (if applicable).

Why would a business owner want to exchange out of his or her current business-use property?

RELOCATION OR EXPANSION/DOWNSIZE OF THE BUSINESS

  • Find a better location to serve clients
  • Expand the number of locations (sell one location and buy multiple locations)
  • Relocate company Headquarters to an updated facility
  • Consolidate locations or buy a smaller building that reduces space and cost

GENERATE MORE INCOME

EXIT STRATEGY FOR BUSINESS OWNER

  • Retiring business owners can sell their real estate for a rental home or condo. Use the acquired property for a vacation rental. After a few years have passed, the owner can convert the property into their residence or a second home.
  • Reduce management obligations. Exchange into more easily managed properties. These properties can include land, triple-net investments, or Delaware Statutory Trusts (DSTs).
  • Use a 1031 exchange as an estate planning tool. Any 1031 exchange property transfers to your heirs upon your passing. The property transfers on a stepped-up basis. The IRS forgives all capital gains and depreciation taxes.

For questions or more information about 1031 Exchanges for business-use property, please contact Midland at 239-333-1031 or schedule a free consultation by clicking here.