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An investment in real estate can provide unique investment portfolio benefits. Property owners may enjoy a steady stream of income, capital appreciation and property-related tax advantages. Yet some property owners may no longer be interested in actively owning and managing property, but still want an allocation to real estate. Under the Internal Revenue Code (IRC or the Tax Code) Sections 1031 and 721, an owner of appreciated real estate can exchange investment property for an alternative real estate investment and defer the capital gain taxes normally associated with divestiture. These tax-deferred exchanges allow investors to maintain 100% of their pre-tax exposure to the real estate sector, rather than paying a portion of the proceeds from a sale to the government in taxes. In addition to the deferral of capital gain taxes, real estate exchanges allow investors to:
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