Category : Tax Savings

Growing Your Wealth with Tax-deferred Exchanges Via IRC § 1031

  • Robert L. Boggess
  • June 14, 2018

Retire Tax Savings

Many real estate investors buy property as a long-term wealth-building strategy. They start investing small, then reinvest to grow their portfolio. Investment property provides passive income and may create legacy wealth for investor and their family. Investors buy property as a vehicle to create wealth from cash flow and appreciation, but taxes are also a big piece of the puzzle especially when one sells their property.

Real estate has a number of built-in potential tax advantages that are unavailable in most other investments, such as the ability to depreciate the building portion of the property, which can effectively reduce your annual income tax while you are in operation mode. And, when you sell you may be able to use other tax strategies to defer capital gains taxes resulting from the sale.

Defer your Capital Gains Taxes at the Time of Sale

The IRC §1031 exchange allows the investor to defer taxes on the capital gain to a more opportune time. A 1031 exchange allows the investor to keep more money in their pocket and use it as additional purchasing power on their next transaction. It’s like a gift from the government. The 1031 exchange can be a vehicle that can continue to grow your wealth.

Get Out of Management (Retire) With Turnkey DST Properties

In this time of unknown economic factors, diversification may provide more stability. And, “like-kind” for a 1031 exchange has a broad interpretation that may allow investors to exchange a warehouse for an interest in an office building, a shopping center, or an energy production property, as well as a different geographical area than your current property. Such diverse properties are often available as Delaware Statutory Trusts “DST”, or DST properties, in which you own a fractional interest with others.

If you are ready to hang up your management duties, using a 1031 exchange allows you to move from management into a professionally managed, institutional quality DST properties that provides passive income.


1031 Exchange Rules

Requirements to qualify for a 1031 exchange.

Sell and buy the right type of assets; the property is held for business or investment.

  • The Investor must acquire title to the replacement property in the same manner as title was held in the relinquished property.

Requirements to fully defer 100% of capital gains tax.

  • Investor must reinvest all proceeds from the sale of the relinquished property(ies).
  • Investor must acquire debt equal or greater to debt paid off from the relinquished property (or replace the debt with additional cash)

Time frames to complete exchange

  • Replacement property(ies) must be identified within 45 days calendar days of the relinquished property sale date.
  • The exchange must be completed by the earlier of:
  1. 180 calendar days from the date of the relinquished property closing; or
  2. The due date of the investor’s federal income tax return, together with all extensions.

Identification rules for replacement properties:

  • 3-Property Rule—up to three (3) properties can be identified without regard to their fair market value.
  • 200% Rule—any number of properties can be identified, as long as their combined fair marketing value does not exceed 200% of the fair market value of all relinquished property.
  • 95% Rule – any number of properties may be identified, as long as the investor closes on 95% of the fair market value of the identified properties.

Tax-deferred exchanges allow investors to defer capital gain taxes as well as potentially facilitate portfolio growth and return on investment.


*  Income and net worth restrictions apply.

  1. Except where noted, the client must be an Accredited Investor as defined in Regulation D under the 1933 Act (i.e., $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly two of the last three years).
  2. IRS tax code is subject to change and the IRS could disallow some or all of the benefits discussed above.  The above numbers are for specific cases. Past performance  is not guaranteed.


IREXA® Financial Services / Wealth Strategies collaborates with CPAs, attorneys, and other tax planning professionals to assist clients with tax mitigation strategies.  IREXA® and Great Point Capital, LLC are not tax professionals or attorneys. IREXA® only provides client tax mitigation strategies through, and with the approval of, the client’s professional counsel. You should review any planned financial transaction that may have tax or legal implications with your personal tax or legal representatives or advisors.

Securities offered through Great Point Capital, LLC, Member FINRA/SIPC, 200 W Jackson Blvd #1000, Chicago, IL 60606, telephone (312) 356-4872. IREXA® Financial Services / Wealth Strategies is not affiliated with Great Point Capital, LLC


Using the Tax Code to Your Advantage for Wealth Preservation


At IREXA, LLC, we are not product providers, we are solution providers. We look at how we can improve tax savings with every action we advise. Real estate is one member of the non – traded alternative asset class we use to provide opportunities to reduce taxes and enhance after tax yield, wealth preservation.

The hardest thing to explain to a client about our services is that at a base level we are product agnostic. We can speak about products, however, our best results are achieved when we fully understand our client’s needs. From that understanding, we develop solutions that use real estate, non-traded alternatives, and insurance in an integrated manner to meet the client’s stated needs as we understand them. We call our method Strategic Tax Mitigation™.

For example, in a recent consultation a high net worth individual had inherited property in the middle of the country. The property was worthless until they found oil. He received an offer on the property, the net price of which was $9,000,000. As the seller, he was interested in deferring his taxable gain.

He explained that he and his wife had already gifted the entire amount that they could to his children from the proceeds. Instead of a $9 million gain, he had created a $4,500,000 tax liability for his heirs.

Using the following assumptions:

1     The couple’s income of $1,500,000 was increased by $540,000 following the acquisition of the 1031 replacement property, for a total annual income of $2,040,000.

2     The couple is in their 70s.

We proposed this solution:

1     By using a Charitable Contribution of a Conservation Easement to offset ordinary income, the estimated annual tax savings was approximately $181,000.

2     The $181,000 tax savings was used to purchase a Second-to-Die, Indexed Universal Life insurance policy. The policy had a death benefit of approximately $10,000,000.00.

3     The insurance policy was structured as an Irrevocable Life Insurance Trust ILIT to take the policy proceeds outside of their estate. This created an additional gift tax on the premium.

The net result was that for nominal costs to the couple, their heirs could receive sufficient proceeds to offset the original estate tax liability as well as leaving them with an additional $5,500,000 that could be used to offset further growth in the parent’s estate.

It is worth looking at all avenues of potential tax savings because each person’s situation is different. At IREXA, we offer a complimentary analysis and comprehensive tax mitigation strategy to every accredited investor.  What have you got to save?





Disclosures: Actual performance will vary and may be more or less favorable than shown. Underwriting classes and criteria will vary with each carrier. Products’ specific features and the client’s use of those features will impact long-term policy performance. It is important that you consider your client’s goals and objectives carefully and discuss them at length before recommending any life insurance product. Values for all policies may contain guaranteed and non-guaranteed elements, including but not limited to current interest rate and current cost of insurance rates. This is not an estimate of future performance. Companies use different methods and setting these rates and there will be variations in their values and meanings. Products actual features and benefits, loads and charges will vary from company to company and will impact the values shown.

IREXA® Financial Services / Wealth Strategies collaborates with CPAs, attorneys, and other tax planning professionals to assist clients with tax mitigation strategies. IREXA® and Great Point Capital, LLC are not tax professionals or attorneys. IREXA® only provides client tax mitigation strategies through, and with the approval of, the client’s professional counsel.

Securities offered through Great Point Capital, LLC, Member FINRA/SIPC, 200 W Jackson Blvd #1000, Chicago, IL 60606, telephone (312) 356-4872. IREXA® is not affiliated with Great Point Capital, LLC.



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* IREXA® Financial Services / Wealth Strategies, Great Point Capital, LLC and Abacus Insurance Advisors, LLC do not provide legal or tax advice.

**Investing has risks; performance is not guaranteed.   Securities offered through Great Point Capital, LLC (GPC) (member FINRA/SIPC). Robert L. Boggess is an independent representative of Great Point Capital, LLC. IREXA®  Financial Services/Wealth Strategies is not an affiliated company with the Great Point Capital, LLC or No offer to buy or sell securities is being made. Such offers may only be to qualified accredited investors via private placement memorandum. Neither GPC nor IREXA® are tax advisors. Prospective strategies and products used in any tax advantaged investment planning should be reviewed independently with your tax and legal advisors. Investments are not guaranteed or FDIC insured and risks may include but are not limited to complete loss of principal investment. Risks detailed in a private placement memorandum should be carefully reviewed, understood and considered before investment. Changes in the tax code and other regulatory revisions could have a negative impact upon strategies developed and recommendations made.

Risk Disclosure: Alternative investment products, including real estate investments, notes & debentures, hedge funds and private equity, involve a high degree of risk, often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop. There may be restrictions on transferring interests in any alternative investment. Alternative investment products often execute a substantial portion of their trades on non-U.S. exchanges. Investing in foreign markets may entail risks that differ from those associated with investments in U.S. markets. Additionally, alternative investments often entail commodity trading, which involves substantial risk of loss.

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