April 7 (Saturday)
The major benefit of 1031 Exchange is tax deferral so that you can leverage the appreciation in your investment to invest further and defer the tax to later days.
In the Bay area, most properties, especially the primary residence, has enjoyed significant gain over the years. As far as real estate is concerned, 1031 Exchange applies to investment properties. It does not apply to primary residence. IRC Section 121 – Exclusion of Gain from Sale of Principal Residence allows (with certain requirement and limitation) each home owner of primary residence to take up to $250,000 exclusion from tax for the gain in the sale.
There is a way to enjoy the exclusion and exchange the rest of the gain into an investment property. Alaine described a few scenarios in which the gain can be split into exclusion and exchange with tax deferral. She also described the scenarios in where Mixed Used Properties could be exchanged partially into other investment properties. Our audience was much enlightened with Alaine’s vivid and informative presentation.