If you own appreciated investment real estate or a business that you want to sell, you may be hesitant to do so because of the capital gains tax exposure you face. The rate could be as high as 20% if your taxable income exceeds $501.600 and you’re a married taxpayer filing jointly.
If you have invested in real estate in the past, you likely have also done a 1031 exchange. As you undoubtedly learned, however, 1031s have numerous risks and disadvantages. While they defer your capital gains tax liability when you sell a piece of appreciated real estate, the rules and regulations that apply to them can make them unappealing at best and downright dangerous at worst. Why? Because they often fail, leaving you with an enormous capital gains tax to pay.