Prior to initiating a Section 1031 exchange it is important for the taxpayer to review both the advantages and the disadvantages. If the taxpayer has specific concerns regarding the feasibility of the exchange for their particular circumstances it is best that the taxpayer discuss their options directly with their tax advisor.

1. Taxpayer can delay or avoid paying taxes to IRS and have their equity working for them in an alternative transaction.
2. Taxpayer can exchange their Real Estate Investments anywhere in the United States.
3. Taxpayer can increase their cash availability (Cash Flow)
4. The 1031 exchange can be used to consolidate or diversify investments.
5. A 1031 exchange is easier and possibly less expensive then alternative options.

1. The exchange can reduce the basis of depreciation in the replacement property. The tax basis of the replacement property is essentially the purchase price of the replacement property minus gain, which was deferred on the sale of the exchange property as a result of the exchange.
2. Not right for all investment transactions (see Investment Requirements)