Real Estate and 10 31 Property Exchanges

benefits of holding real estate investments aside from capital appreciation

In common practice, property owners sell their real estate holdings for one reason only: profit.  It is not enough just to put up the money and let it ride. For real estate investors, holding onto their properties can provide them with safety and security. The property value would surely appreciate especially if the owner decides to sell it.

Holding the property also provides the owner with tax benefits especially in terms of capital gains and dividends. Property owners can exchange real estate held primarily for rental income for an additional real estate of like kind and as long as both the properties are maintained for rental income, all passive property is considered to be of like type. Any realized capital profits are subject to deferred taxes until the replacement property comes into view, hopefully at an opportune time. In case of death, the capital gain will be considered normal, non-taxable income.

Tax advantages provide the advantage of cost-effective real estate management

Holding real estate assets is also beneficial to businesses. The most common benefit is the exemption on mortgage interest and property taxes. Another tax advantage is the ability to depreciate the value of the real property by an agreed amount on a yearly basis.

Tax benefits of holding the properties can be maximized and utilized by carrying out tax relief programs under the auspices of the federal government. One such program is the affordable home program that aims to provide tax relief to those who cannot afford high-priced residential properties. Real estate investments can also be made into productive use. By making the necessary improvements on properties or by developing productive properties in areas where they are required, one can also make good rental returns.


When an individual sells his real estate holdings and thus receives a lump sum cash payment, he has to pay tax on the sale proceeds. This amount is known as the capital gain and hence is subject to tax. The alternative method of exchanging the real estate for a replacement property within the prescribed time-limit is known as 10 31 property exchanges.

Under the provisions of the Jobs Act, individuals who become unemployed or who stop working for a certain period of time from any business can sell their assets and receive cash payments. For business owners this is a good opportunity to generate more capital gains tax cut. It is essential to ensure that all the requirements are met under the law such as relevant notifications, transfer documentation and valuation of the assets. Business owners can take advantage of the capital gains tax cut under the Jobs Act and save on the taxes.

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