EXCHANGE BASICS
A Sale vs. an
Exchange
Every dollar saved in taxes allows an investor to purchase substantially more real estate. To illustrate the value of an exchange versus a sale, assume the following: An investor sells a fully depreciated property with no debt. The capital gain is $300,000 and the combined federal and state tax rate is 33%.
| Net Equity |
$300,000 |
vs |
Net Equity |
$300,000 |
| Capital Gain Tax |
$100,000 |
vs |
Capital Gain Tax |
$0 |
| Equity to Reinvest |
$200,000 |
vs |
Equity to Reinvest |
$300,000 |
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