back to articles/index As appeared in... March 18, 2008

To Defer Or Not To Defer . . .
Journal Observes Shift in 1031 Strategy

In a recent edition of The Wall Street Journal, Arden Dale describes how some real estate investors are adjusting their tax strategy based on their uncertainty of who will control The House, The Senate and The Executive Branches of our government in 2009. Many are abandoning tax-deferral strategies in favor of just paying taxes while they’re still low.

by James Schuler, 1031 Exchange Experts, LLC

This fear is apparently affecting real estate investors across the board, from the big land magnate to the small guy who inherited a rental from his parents.

“...Each real estate transaction presents it’s own particular distinctions; one plan of action may not suit the other....”

Dale cites Gary Gorman, author of the book "Exchanging Up!," who said some people believe the current 15% tax rate on long-term capital gains could go as high as 20% to 25% if a Democrat is elected president. "Now the question is, 'Do I want to pay 15% now, or 20% or 25% five years from now?' "

A 1031 transaction "...takes the tax you would have had to pay to the IRS, and lets you use that to lever up into a bigger property than you would have been able to afford," said Mr. Gorman.

The important thing is to not treat the choice to defer or not to defer as a ‘one-size-fits-all’ kind of decision. Each real estate transaction presents it’s own particular distinctions, and the plan of action that best suits one may not suit the other.

One constant that IS a good idea in all situations is to consult with a 1031 exchange expert. An Expert can help you determine which kind of tax strategy suits your particular situation.

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