The example depicts two sales of real estate, the initial assumption is that the property has been completely depreciated and the entire $100K of initial equity is a capital gain. Event 1 Event 2 Typical Sale 1031 Exchange Investment experiences 20% appreciation Typical Sale 1031 Exchange Equity 100,000 100,000 160,000 200,000 Tax 20,000 0 16,000 0 Net Equity to Invest 80,000 100,000 144,000 200,000 New Investment (20% Down payment) 400,000 500,000 720,000 1,000,000 By the end of event two, the investor who utilizes 1031 Exchanges is able to invest in a property that is 39% greater in value than the investor who sells his (her) real estate investments in a typical manner...
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They are getting older now and are planning to retire and to move to Miami. John and Jane would like to sell the Atlanta Duplex and purchase a small commercial building next to the lovely condo they bought on the beach. The main issue is John and Jane can only afford to buy this building if they are able to capture all of the existing equity in their Atlanta duplex...
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