What is a Capital Gain?
In simple terms, if an investor’s property appreciates in value, the investor has what is called a capital gain. If the investor sells this property at the appreciated price, the IRS considers this capital gain as “recognized”. As such, capital gains taxes must be paid on the amount of the gain. For many real estate transactions, this tax can add up to tens of thousands or millions of dollars. Payment of capital gains taxes can be legally avoided by effecting a 1031 Exchange.