If you’re in the rental property game and are looking to unload one property and upgrade to another you may find the Starker Trust to your benefit. The Starker Trust is sometimes referred to as the 1031 tax free exchange. Basically it states that if you are going to sell your current investment or rental property you can avoid paying the capital gains taxes on your property sale by purchasing another rental property.
There are some rules that apply to this transaction of course. The first rule is that there is a specified time period between your rental property sale and the purchase of your new rental property. You must also purchase a property that is valued at the same amount or more than the property you sold. This will then let you defer the capital gains taxes until you sell this new property.
If you are thinking the 1031 tax free exchange or Starker Trust is something you want to pursue, you are actually well advised to seek the assistance of a real estate attorney and possibly a tax specialist to make sure every step you take falls within the specified guidelines or you could easily lose out on this tax benefit.