A section of the Internal Revenue Code, referred to as “1031 exchanges” is increasingly being used by investors to defer taxes. Under a “1031″ participants are allowed to defer, or sometimes even avoid, capital-gains taxes when they sell a business or investment property and replace it with a similar asset within a specific period. (Some people have used the basic concept to defer taxes on gains in other types of properties, including art and collectables.)

Like-kind exchanges have, according to the Treasury Inspector General for Tax Administration, surged over the past decade as real-estate investors searched for legitimate ways to postpone, or avoid, taxes on big gains.

According to the Treasury report, taxpayers filed more than 338,500 forms reporting like-kind exchanges in 2004, deferring more than $73.6 billion. That figure doubled the number of like-kind exchanges reported in 1998, with the total dollar amount deferred more than tripling in that time period.

These totals included individuals, partnerships and corporations. The report said individuals accounted for 65% of the forms filed and 39% of the dollar amount.

This entry was posted on Wednesday, October 10th, 2007 at 8:34 am and is filed under Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.