Foreign real estate investors who buy in the U.S. are subject to U.S. capital gains tax liability at both the federal and state levels on the sale of appreciated properties. Experienced real estate investors recognize the 1031 exchange as an effective and simple means toward deferring tax liabilities incurred upon the future sale of U.S. real estate property. Section 1031 of the Internal Revenue Code allows 100% of the gains from the disposition of business or investment property to be deferred into new “like kind” replacement property. These deferred gains, as well as the gains from the new property, are not taxed as long as 1031 Exchange rules are followed.
The overall U.S. capital gains tax rate averages between 20% and 25% for the individual investor (depending on the amount of depreciation taken and the applicable state income tax rate) and by exchanging into a new U.S. property at the end of a holding period, U.S. property owners can legally defer payment of these taxes and free-up capital for new investments by following 1031 rules. Real Estate investors can therefore increase their overall returns by using 1031 exchanges to roll from one commercial real estate investment to the next.
Corporate Realty Advocates will refer only the most well-established and secure Qualified Intermediaries in the industry to facilitate your 1031 Exchange transaction. This unique investment tool gives the investor the ability to diversify, leverage and defer taxes. Your Corporate Realty Advocates Agent can help you locate an appropriate replacement property in which to reinvest requiring minimal effort on your part.