Benefits

  • The taxpayer can dispose of property and acquire new property without immediate capital gains liability. In effect, this is an "interest free loan" from the government which can be increased through subsequent exchanges.
  • Under current law, the deferred tax liability is forgiven upon the death of the taxpayer- the taxpayer's estate never has to repay the "loan."
  • Business considerations should play the dominant role in the decision to make an exchange. For example, the need or desire to:
    • Consolidate or diversity investments
    • Obtain greater appreciation on the real property
    • Increase cash flow
    • Relocate a business investment
    • Eliminate management problems

Disadvantages and Other Considerations

  • Reduced basis in the Replacement Property, resulting from the carry-over of the basis of the Relinquished Property
  • Lower depreciation deductions
  • Possible additional escrow, attorney, accounting, intermediary and accommodation titleholder's fees.
  • Net proceeds from the disposition of the property cannot be used for anything except reinvestment in real property (without tax consequences).
A Ten Thirty-One Exchange Corp. 2011 Botulph Road
Suite 200
Santa Fe, NM 87505
505-982-1031 phone
505-982-5211 fax
800-500-1031