EXCHANGE BASICS

A Sale vs. an Exchange

Every dollar saved in taxes allows an investor to purchase substantially more real estate. To illustrate the value of an exchange versus a sale, assume the following: An investor sells a fully depreciated property with no debt. The capital gain is $300,000 and the combined federal and state tax rate is 33%.
Net Equity $300,000 vs Net Equity $300,000
Capital Gain Tax $100,000 vs Capital Gain Tax $0
Equity to Reinvest $200,000 vs Equity to Reinvest $300,000

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