Here is comparison on the sale of a $1 million property with and without a 1031 exchange.
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The IRC Section 1031 Exchange is one of the most powerful tax-saving and wealth-building tools available for people selling highly appreciated farm or ranch land. A properly structured 1031 exchange allows a family selling a farm or ranch to sell land, to reinvest the proceeds in other real estate, and to defer capital gain taxes.
To quote the tax code, IRC Section 1031 (a)(1) states: “No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.”
Many farm and ranch owners believe the “like-kind” definition means they have to exchange their land into other land. This is not the case. Fortunately, the definition for “like-kind” property is very broad. One can exchange land into other types of investment property such as office buildings, apartment complexes etc.
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