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Deferring taxes with 1031 exchanges

New Yorkers who own portfolios of real estate holdings as investment properties may feel that they can't sell them because of the capital gains taxes that they might face. These portfolios can be optimized, and the people can use the 1031 exchange to sell their properties without paying capital gains taxes while moving into more passive management roles.

In addition to the capital gains taxes, planning should also include a consideration of the depreciation recapture and state taxes that can also impact the sales of investment properties. These added taxes may potentially eat up as much as 33 percent of the sales prices.

A 1031 exchange allows property owners to dispose of investment properties if they use professional qualified intermediaries and use the proceeds to complete like-kind purchases of real estate. Some investors use this method to pay no taxes while selling multiple smaller investment properties and purchasing larger buildings in the 1031 exchanges. This may allow investors to streamline their portfolios, avoid taxes and assume more passive roles in managing their buildings instead of a slew of various investment property holdings.

Tax planning is a vital component of selling investment properties. Without it, owners may lose substantial sums in taxes from their sales prices. They might benefit by getting the help of experienced commercial law and real estate attorneys who might help them to set up their 1031 exchanges correctly so that they can realize the greatest benefit. Attorneys may be able to structure the deals in such a way that their clients will face no taxes by using tax-deferred 1031 exchanges. In order to realize the benefits of these exchanges, they must be completed correctly or no tax benefits will be realized.

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