Pros and Cons of 1031 Investment Exchange

1031 exchange capital gains

People of the United States show their interest in the 1031 exchange capital gains as this is actually a good idea for the real estate business people. With the 1031 exchange, they can get the opportunity to make a tax-deferred exchange for the properties. The IRS allows the investors to sell the property and this helps to defer the capital gains. If you are also into this, you should know the pros and cons of the 1031 exchange.


  1. Deferring the taxes is the best option one can have through the 1031 exchange. There are several taxes associated with the same. The list includes capital gain tax, depreciation recapture tax, Affordable Care Act tax and many other depending on the factors and the country you reside. With the 1031 exchange, you can defer these taxes.

  2. The cash flow is high with this exchange. It is surveyed and calculated that the capital gain tax value goes much higher than the investment of the property that you are getting with 1031 exchange. If you are counting long term profit with your own asset, the 1031 exchange instead of capital gain taxes is obviously a better option.

  3. There is no particular limit for the exchange, you can sell the properties and get the offer of 1031 exchange. In this way, you will be able to invest in larger properties and that will remain your asset and you don’t have to count the taxes for it as well.

1031 exchange capital gains

While discussing the other side of the coin, it can be said that like other things, 1031 exchange option is also not flawless. It has some cons as well, and before investing in it, you should know the area of considerations as well.

  • The rules and regulations are very strict. Between the selling of the property and buying a like-kind one you will get 180 days of time. Within the first 45 days, you have to choose the property which you want to present as the exchange property. The property should be like-kind and the price including the mortgage should be at least the same or more than the old one.

  • The idea you have to be very certain about is that the 1031 exchange can defer the capital gains tax, you would not be tax-free. For all the capital gains, you have to pay the tax, but the exchange can defer it. The situation can be avoided though, if you have a proper 1031 exchange planner.

1031 exchange capital gains

For the further inquiries pertaining to the 1031 exchange and the associated capital gains, you can call Ten31 Minerals. The professional may give you a better plan to crop the hassles. Contact them asap.