1031 Exchanges for Property Owners
1031 Exchanges Go Hand-in-Hand with a Cost Segregation Study
Cost segregation studies, as well as 1031 exchanges, are a useful tax tool available to commercial real estate owners. Through proper tax planning, both techniques can be used simultaneously to maximum the tax benefits.
Both tools are used to defer taxes and therefore improve cash flow. Cost segregation and 1031 exchanges are useful on every type of commercial property. Both techniques also encompass complex areas of tax law and necessitate the use of specialists, such as those employed by CSC.
1031 exchanges require a “Qualified Intermediary” to perform the transaction and ensure proper execution. This will also help in case there is an audit. Cost segregation studies require a knowledgeable engineering consulting firm, such as CSC, to perform and validate them. It is also required that those specialists work closely with the property owner’s accountant or another tax advisor.
These two methods should be used effectively and provide a great opportunity for the taxpayer to defer income taxes into future periods. This, in turn, maximizes cash flow in the present. In order to use cost segregation and 1031 exchanges together successfully, the property owner’s CPA must fully understand the tax laws of both tools and how they apply to the client’s individual investment strategy.