Deferring capital gains taxes with a like-kind exchange
Abstract: Taxes can be an obstacle even in a sluggish real estate market. If you’ve held property for a long time, it may be worth substantially more than you paid for it, even if its value has declined in recent years. Also, years of depreciation deductions may have reduced or eliminated your tax basis in the property. So if you’re planning to sell property and capital gains will be triggered, find out if a like-kind exchange is an option for you. Also known as a Section 1031 exchange after the relevant section of the Internal Revenue Code, a like-kind exchange may be able to help you defer — or even permanently avoid — capital gains taxes. This article explains how like-kind exchanges work and how taxpayers may save.