{"id":27275,"date":"2020-10-20T17:27:44","date_gmt":"2020-10-20T21:27:44","guid":{"rendered":"https:\/\/www.affiliated1031.com\/seven-ways-1031-exchanges-can-help-strengthen-businesses\/"},"modified":"2023-06-29T12:02:30","modified_gmt":"2023-06-29T16:02:30","slug":"seven-ways-1031-exchanges-can-help-strengthen-businesses","status":"publish","type":"post","link":"https:\/\/www.affiliated1031.com\/es\/seven-ways-1031-exchanges-can-help-strengthen-businesses\/","title":{"rendered":"Seven Ways 1031 Exchanges Can Help Strengthen Businesses."},"content":{"rendered":"<div  class=\"tatsu-h6usx11wpn971etm tatsu-section  tatsu-bg-overlay   tatsu-clearfix\" data-title=\"\"  data-headerscheme=\"background--dark\"><div class='tatsu-section-pad clearfix' data-padding='{\"d\":\"15px 0px 15px 0px\"}' data-padding-top='15px'><div class=\"tatsu-row-wrap  tatsu-wrap tatsu-row-one-col tatsu-row-has-one-cols tatsu-medium-gutter tatsu-reg-cols  tatsu-clearfix tatsu-h6usx11wre7d9mtu\" ><div  class=\"tatsu-row \" ><div  class=\"tatsu-column  tatsu-bg-overlay tatsu-one-col tatsu-column-image-none tatsu-column-effect-none  tatsu-h6usx11wsu6hz22n\"  data-parallax-speed=\"0\" style=\"\"><div class=\"tatsu-column-inner \" ><div class=\"tatsu-column-pad-wrap\"><div class=\"tatsu-column-pad\" ><div  class=\"tatsu-module tatsu-text-block-wrap tatsu-h6usx11wu6cbnnqg  \"><div class=\"tatsu-text-inner tatsu-align-center  clearfix\" ><style>.tatsu-h6usx11wu6cbnnqg.tatsu-text-block-wrap .tatsu-text-inner{width: 100%;text-align: left;}<\/style><p><\/p>\n<table class=\"mcnTextBlock\" border=\"0\" width=\"100%\" cellspacing=\"0\" cellpadding=\"0\">\n<tbody class=\"mcnTextBlockOuter\">\n<tr>\n<td class=\"mcnTextBlockInner\" valign=\"top\">\n<table class=\"mcnTextContentContainer\" border=\"0\" width=\"100%\" cellspacing=\"0\" cellpadding=\"0\" align=\"left\">\n<tbody>\n<tr>\n<td class=\"mcnTextContent\" valign=\"top\">\n<h4><em>1031 Exchange transactions can help business owners leverage valuable cash to finance critical growth strategies.<\/em><\/h4>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<table class=\"mcnTextBlock\" border=\"0\" width=\"100%\" cellspacing=\"0\" cellpadding=\"0\">\n<tbody class=\"mcnTextBlockOuter\">\n<tr>\n<td class=\"mcnTextBlockInner\" valign=\"top\">\n<table class=\"mcnTextContentContainer\" border=\"0\" width=\"100%\" cellspacing=\"0\" cellpadding=\"0\" align=\"left\">\n<tbody>\n<tr>\n<td class=\"mcnTextContent\" valign=\"top\">\n<p>At least once a week I get asked:\u00a0\u00a0 What are the benefits of doing a <strong><a title=\"Link to Wikipedia definition of 1031 Exchange\" href=\"https:\/\/en.wikipedia.org\/wiki\/Internal_Revenue_Code_section_1031\" target=\"_blank\" rel=\"noopener noreferrer\">Section 1031 Exchange<\/a><\/strong>?\u00a0 I normally give the usual answer:\u00a0 Deferral of Taxes resulting in more funds to spend on possible Replacement Properties.<\/p>\n<p>That is the simple one-sentence answer.\u00a0 But there are really a lot more reasons.<\/p>\n<p>The Federation of Exchange Coordinators (FEA), because of the COVID-19 crisis, prepared\u00a0these seven points on how Section 1031 helps\u00a0businesses, and I thought you would find these interesting.<\/p>\n<h2 class=\"null\">1. LIKE-KIND EXCHANGES STIMULATE BUSINESS GROWTH OF ALL SIZES.<\/h2>\n<p>\u00b7 \u00a0Section 1031 is important to the efficient operation and ongoing vitality of thousands of American businesses in a wide range of industries, business structures, and sizes.<\/p>\n<p>\u00b7 \u00a0Small and mid-size business owners and middle-class taxpayers use Section 1031 to transition into facilities and locations that more efficiently meet their needs, instead of being tax-locked into yesterday\u2019s inefficiencies.<\/p>\n<p>\u00b7 \u00a0Section 1031 allows taxpayers to shift into more productive like-kind property, change geographic location, and diversify or consolidate holdings.<\/p>\n<h2 class=\"null\">2. LIKE-KIND EXCHANGES STIMULATE NEEDED CAPITAL INVESTMENT.<\/h2>\n<p>\u00b7 \u00a0As a result of the economic fallout from the coronavirus pandemic, large amounts of retail and office space are expected to become vacant or underused as businesses transition to different operating models.<\/p>\n<p>\u00b7 \u00a0Like-kind exchanges encourage capital investment for the highest and best use of real estate, thus improving communities and increasing the local and state tax base.<\/p>\n<h2 class=\"null\">3. LIKE-KIND EXCHANGES HELP REPURPOSE AVAILABLE REAL ESTATE.<\/h2>\n<p>\u00b7 \u00a0<strong><a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/like-kind-exchanges-real-estate-tax-tips\">Section 1031 like-kind exchanges<\/a><\/strong> are a useful tool in repurposing available retail and office space because they allow capital to efficiently and effectively flow to where it\u2019s most needed.<\/p>\n<p>\u00b7 \u00a0According to a 2015 study by Professors David Ling &amp; Milena Petrova, Section 1031 like-kind exchanges give businesses and entrepreneurs more incentive and ability to make real estate and capital investments.<\/p>\n<p>\u00b7 \u00a0Taxpayers engaged in like-kind exchanges invested 33% more capital in replacement property than non-exchanging buyers.<\/p>\n<p>\u00b7 \u00a0The Ling &amp; Petrova study found that without the Section 1031 tax incentive, many transactions would be delayed or abandoned, and real estate values would erode.<\/p>\n<h2 class=\"null\">4. LIKE-KIND EXCHANGES CREATE JOBS.<\/h2>\n<p>\u00b7 Like-kind exchanges generate jobs and taxable revenue for unrelated businesses upstream and downstream from the exchange transaction, such as real estate agents, title and property insurers, escrow\/settlement agents, lenders, appraisers, surveyors, attorneys, inspectors, contractors, building supply vendors and more.<\/p>\n<h2 class=\"null\">5. LIKE-KIND EXCHANGES HELP FAMILY FARMERS AND THE ENVIRONMENT.<\/h2>\n<p>\u00b7 \u00a0<strong><a href=\"https:\/\/www.affiliated1031.com\/es\/mixed-use-1031-exchanges-what-you-should-know\/\">Farmers and ranchers use Section 1031<\/a><\/strong> to relocate, consolidate, or improve their operations without diminishing cash flow.<\/p>\n<p>\u00b7 \u00a0Retiring farmers are able to exchange their most valuable asset, their farm or ranch, for other real estate without diminishing the value of their life savings.<\/p>\n<p>\u00b7 \u00a0Like-kind exchanges are used in conservation easements to improve water quality, reduce soil erosion, maintain wetlands, and sustain critical wildlife habitat.<\/p>\n<p>\u00b7 \u00a0These exchanges enable landowners to acquire replacement farm or ranchland in less environmentally sensitive areas.<\/p>\n<h2 class=\"null\">6. TAXES ARE DEFERRED, NOT ELIMINATED.<\/h2>\n<p>\u00b7 \u00a0A common myth of Section 1031 is that taxes are eliminated. However, the truth is at some point, the tax is paid.<\/p>\n<p>\u00b7 \u00a0The Ling &amp; Petrova study found that the overwhelming majority (88%) of properties acquired through an exchange are later sold in a taxable transaction, at which time the tax is paid.<\/p>\n<p>\u00b7 \u00a0The remaining 12% includes ALL non-taxable transfers such as subsequent exchange, foreclosure, eminent domain, partition or other court-ordered transfer, divorce, partnership dissolution, gift, and death.<\/p>\n<p>\u00b7 \u00a0One-third of all exchanges pay some tax during the year of the exchange because some taxable boot is received.<\/p>\n<h2 class=\"null\">7. ELIMINATING LIKE-KIND EXCHANGES WOULD HURT CASH-STRAPPED BUSINESSES.<\/h2>\n<p>\u00b7 \u00a0Eliminating or limiting like-kind exchanges in the best of times would have a negative impact, increasing the cost of capital, slowing the rate of investment, increasing asset holding periods, and reducing real estate transactional activity.<\/p>\n<p>\u00b7 \u00a0In the face of the current pandemic, recession, and economic upheaval, the contractionary impact on American business and the U.S. economy would be even more severe.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><\/p><\/div><\/div><\/div><\/div><div class = \"tatsu-column-bg-image-wrap\"><div class = \"tatsu-column-bg-image tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-column-overlay tatsu-animate-none\" ><\/div><\/div><style>.tatsu-row > .tatsu-h6usx11wsu6hz22n.tatsu-column{width: 100%;}.tatsu-h6usx11wsu6hz22n.tatsu-column > .tatsu-column-inner > .tatsu-column-overlay{mix-blend-mode: normal;}.tatsu-h6usx11wsu6hz22n > .tatsu-column-inner > .tatsu-top-divider{z-index: 9999;}.tatsu-h6usx11wsu6hz22n > .tatsu-column-inner > .tatsu-bottom-divider{z-index: 9999;}.tatsu-h6usx11wsu6hz22n > .tatsu-column-inner > .tatsu-left-divider{z-index: 9999;}.tatsu-h6usx11wsu6hz22n > .tatsu-column-inner > .tatsu-right-divider{z-index: 9999;}<\/style><\/div><\/div><\/div><\/div><div class=\"tatsu-section-background-wrap\"><div class = \"tatsu-section-background tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-section-overlay\"><\/div><style>.tatsu-h6usx11wpn971etm .tatsu-section-pad{padding: 15px 0px 15px 0px;}.tatsu-h6usx11wpn971etm > .tatsu-bottom-divider{z-index: 9999;}.tatsu-h6usx11wpn971etm > .tatsu-top-divider{z-index: 9999;}.tatsu-h6usx11wpn971etm .tatsu-section-overlay{mix-blend-mode: normal;}<\/style><\/div>","protected":false},"excerpt":{"rendered":"<p>At least once a week I get asked:\u00a0\u00a0 What are the benefits of doing a Section 1031 Exchange?\u00a0 I normally give the usual answer:\u00a0 Deferral of Taxes resulting in more funds to spend on possible Replacement Properties.<\/p>\n<div><a href=\"https:\/\/www.affiliated1031.com\/es\/seven-ways-1031-exchanges-can-help-strengthen-businesses\/\" class=\"exp-read-more exp-read-more-underlined\">Read More<\/a><\/div>\n","protected":false},"author":1,"featured_media":26960,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","footnotes":""},"categories":[57],"tags":[],"class_list":["post-27275","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-1031-exchange-basics-es"],"_links":{"self":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27275","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/comments?post=27275"}],"version-history":[{"count":3,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27275\/revisions"}],"predecessor-version":[{"id":28105,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27275\/revisions\/28105"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/media\/26960"}],"wp:attachment":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/media?parent=27275"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/categories?post=27275"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/tags?post=27275"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}