Wealth Building: Potentially, the greatest benefit that comes from utilizing 1031 exchanges is the ability of the taxpayer to preserve all of its equity in the relinquished property. The compounding effect of earning a continual return on all of the equity, instead of a portion of the equity, can result in a higher overall yield for the taxpayer. By exchanging assets and deferring tax, the return potential is higher. For example, at a 10% ROI on a $10 asset with $2 being paid in tax for the exchange, the asset amount after Year 1 is $8.80. However, the tax deferred asset amount is $11 after Year 1. This preservation of equity via exchanging is a powerful wealth building tool.
This preserved equity base not only benefits from property appreciation, but greater equity typically means that a taxpayer can qualify for a larger loan, thus leveraging the preserved equity to acquire a more valuable property. Through a 1031 exchange, the taxpayer can preserve his or her equity, and allow for the compounding effect of a larger equity base to build substantial wealth over time.
Strategic 1031 Exchange Advisors, LLC, a Georgia limited liability company, is a qualified intermediary for 1031 exchanges only. It is not an accounting firm, law firm or registered investment professional and therefore is not qualified to give accounting, tax, legal or investment advice, and, further, cannot act in an agency capacity on behalf of its clients. This website is for informational purposes only and does not and is not intended to constitute accounting, tax, legal or investment advice. We advise you to consult with your accountant, attorney and investment professional on all matters related to your exchange.