If you own an investment which you have held for business, trade, or as a rental, then the 1031 Exchange is the perfect tool for you. When it comes time to list and sell your investment, you must anticipate paying the capital gains tax on the appreciation you have accrued over the years since you have owned it. You will also be subject to paying tax on any accumulated depreciation. Thankfully, the IRS offers a valuable exception within the tax code which allows investors to defer their capital gains on the sale of their property and roll it into another investment.
Example:
An investor exchanges a 20-Unit Apartment Building valued at $8,000,000 with no debt for a $10,000,000 Office Building for a tax savings of $1.5 million which is used to purchase substantially more replacement property.