How to Leverage Real Estate Tax-Deferral Strategies to Grow Your Business

A number of tax trends are occurring in tandem with certain tax-deferral strategies.

The real estate tax-deferral strategies can help you to grow your business. 89stocker/ShutterStock

By Michael Malakoff

It goes without saying that, all things being equal, having access to a larger pool of money offers you the chance of greater returns. That’s why strategies to defer tax payments are so perennially popular, as a way to grow investments and businesses, larger and faster.

With that in mind, a number of tax trends are attracting renewed attention and should be of interest to you:

• Real estate owners are transitioning away from the active management of their properties.
• Real estate investors are looking to diversify their holdings while avoiding an exit tax.
• Owners or investors are looking for the next project, and not an immediate tax bill.

So, what are the strategies being used in tandem with these tax-deferral trends?

A 1031 Exchange

In its most basic form, Internal Revenue Code (IRC) Section 1031 allows owners to exchange one piece of real property for another, without triggering the capital gains tax. By reinvesting in essentially the same type of enterprise, as part of an integrated transaction, owners can defer the tax they would owe on any appreciation in value.