Even small investors should consider doing a 1031 exchange, whereby you sell one investment property and immediately put the proceeds toward another investment property. You benefit, because you only pay taxes when you finally stop buying new properties…hopefully sometime way down the line, when you’re old.
By Vivian Marino, The New York Times
As real estate prices have soared, more and more investors have been doing these like-kind exchanges. The 1031 designation is derived from the section of the federal tax code that sanctions such exchanges. For some people, they are akin to a free loan from the Internal Revenue Service.
"If you don’t have to pay income tax on something, you can do something else with that money – like make more money," said Alan E. Weiner, a partner in the accounting firm Holtz Rubenstein Reminick in Melville, N.Y.
Before hopping on the 1031 carousel, though, investors need to proceed with caution.
Complete article: Trading Spaces, and Deferring the Taxes