When you’re doing a 1031 tax exchange, you need to know what a capital gainA Capital Gain is the profit made on the sale of stocks, bonds, real estate, or other assets. is. A capital gain is a profit on a capital asset. Capital gains tax is 15 percent on real estateReal Estate is land and anything permanently attached to it, such as buildings and improvements.. But if you’re doing a 1031 exchangeA 1031 Exchange is a means used by investors to defer the payment of federal income taxes. The owner of an investment property will sell that property, deposit the funds with an intermediary company, later buy a replacement like kind property and defer the payment of all federal income taxes. There are many rules that apply to these type of exchanges. with another type of investment you’ll likely pay your ordinary income tax rate on the capital gain.
1031 Exchange: What Is a Capital Gain?
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