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IRS Tax Advantages 1031 Exchange


Example of a 1031 Exchange:

In 2005 you paid $620,000 for a 3-family home. That 3-family home now grosses $7,500/month with a net of $3,400./month after expenses.

You can now sell that 3-family home for $1,500,000. To make things simple, we will exclude some other tax benefits; such depreciation and expenses. We are going to assume you did not reside there and it was purely an investment property. Your taxable gain would be:

            $1,500,000 - $620,000 = ~$880,000.

Most people would pay 35-50% tax on that with today's State and Federal taxes.

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