6 Chapter Tax Deferred Exchange

6 Chapter Tax Deferred Exchange - Taking The Mystery Taking...

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Unformatted text preview: Taking The Mystery Taking The Mystery Out of the Out of the Tax Deferred Exchange Tax Deferred Exchange The 1031 Tax Deferred Exchange The 1031 Internal Revenue Code (IRC) tax deferred exchange has been created to encourage investors to move disposable cash at a maximum profit. This is accomplished by deferring the taxes on the profit from one investment upon the disposition of that investment when the tax payer is investing in another investment. There are guidelines and rules. The Problem With The Tax Deferred Exchange The problem with the 1031 IRC tax deferred The problem with the 1031 IRC tax deferred exchange is that people try and accomplish exchange is that people try and accomplish the exchange with two people and two the exchange with two people and two properties. This is called the Two-Way properties. This is called the Two-Way Exchange. Exchange. 99.9% of Tax Deferred Exchanges are 99.9% of Tax Deferred Exchanges are accomplished using the 3-Way Exchange. accomplished using the 3-Way Exchange. The Three-Way Exchange is the most common use of The Tax Deferred Exchange The Goat Story is a good analogy of a The Goat Story is a good analogy of a real exchange. If you use the Goat Story real exchange. If you use the Goat Story or the Automobile Story to fall back on or the Automobile Story to fall back on youll have two constant references you youll have two constant references you can refer to. can refer to. Workers exchange or trade their time, Workers exchange or trade their time, effort, and talent for something else. effort, and talent for something else. The something else is normally money. The something else is normally money. Ordinary work is an example of exchange. Money made this exchange a good deal Money made this exchange a good deal simpler than it was before money was simpler than it was before money was universally accepted. universally accepted. The Goat Story The Goat Story Go back in time, if you will, to 800 BM. Go back in time, if you will, to 800 BM. (Before Money) Imagine that I have a Cow (Before Money) Imagine that I have a Cow that you would really like to have and you that you would really like to have and you reasoned that one cow was worth two goats. reasoned that one cow was worth two goats. Before money bartering was a way of life Before money bartering was a way of life but it was complicated. When someone but it was complicated. When someone worked their wages were paid in worked their wages were paid in commodities. When they needed other commodities. When they needed other things, other commodities, they had to trade things, other commodities, they had to trade what they had for what they needed....
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6 Chapter Tax Deferred Exchange - Taking The Mystery Taking...

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