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Trading places: Make your move now

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Now may be the time for savvy real estate investors to make a move.

Strategy: Trade property you own for a “like-kind” property. As long as you meet all the current tax law requirements, you can defer any appreciation in value built up over the years until you sell the replacement property—if ever.

By using this technique, real estate owners literally defer tax on billions of dollars each year.

Here’s the whole story: Under Section 1031 of the tax code, an individual can defer taxable gains when exchanging properties that are similar in nature, except to the extent that he or she receives cash or other “boot” as part of the transaction. In that case, you must pay current tax on the gain up to the amount of boot received. Otherwise, no tax is owed until you sell the newly acquired property.

To qualify as a like-kind exchange, both the property being relinquished and the property being acquired must be investment or business p...(register to read more)

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