Why Exchange?

1031 Exchange vs. Non-Exchange Sale(NES)

Adjusted Basis:   

Purchase Price:               $10,000,000($8,000,000 Debt Service) 
(Depreciation):              ($2,000,000)                                                                                   
Capital Improvements:    $500,000________________________
Adjusted Basis                 $8,500,000

Gain:
Sales Price:       $20,000,000 
Adjusted Basis: ($8,500,000)                          
Gain:                $11,500,000

Taxes:                                                                                                                                                                                                                                                                                                                                 25% Depreciation Recapture: $2,000,000 X 25%= $500,000  
15% Federal Capital Gains(>1 yr): $11,500,000 X 15% = $1,725,000         
5% State Capital Gains(% varies upon State): $11,500,000 X 5% = $575,000
Total Taxes Due: $2,800,000

1031 Exchange vs. Sale:       
Sale Price:    $20,000,000($8,000,000Debt Service) = $12,000,000  Equity         
Taxes Paid:   $0(1031 Exchange Sale)  vs.  $2,800,000(NES)

Equity to Reinvest : 
$12,000,000(1031 Exchange Sale) vs $9,200,000(NES)

Deferred Tax Savings: $2,800,000