HOT 1031 PROPERTY OF THE MONTH:

504 Owen Drive, Fayetteville, NC	Click here to see photos...
About the Location: For the past 22 years Doctor's Urgent Care operated successfully from its original location on Owen Drive just 150 feet north of its new location. Their move to 504 Owen Drive was precipitated by a need for a more efficient and professional environment that the previous Landlord was not willing to provide. This facility has been Doctor's Urgent Care's 2nd highest volume facility for years. The site has maximum retail exposure with in excess of 50,000 ADT vehicular count. This is an established Fayetteville medical facility, situated in the midst of a dense medical office community and only '!4 mile from Cape Fear Medical Center. This building is approximately 40% of a larger 10,000 square foot building that has been partitioned into 2 separately deeded (town home) units. Constructed in the 1940's the building has been renovated and expanded on several occasions during the past 50 years and most recently in January 2002.
Click here to read Fayetteville Fact Sheet...
	Miami Sub - high traffic count frontage on 10th Street, downtown Greenville, NC - near ECU campus
	INVESTMENT OPPORTUNITY Beacon Drive Shoppes Winterville, NC 30,000 sf  Retail /Office Space, Built in 2003 100% Leased $3,255,000 - 7% CAP

In a typical transaction, the property owner is taxed on any gain realized from the sale. However, through a Section 1031 Exchange, the tax on the gain is deferred until some future date.

Section 1031 of the Internal Revenue Code provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment. A tax-deferred exchange is a method by which a property owner trades one or more relinquished properties for one or more replacement properties of "like-kind", while deferring the payment of federal income taxes and some state taxes on the transaction.

The theory behind Section 1031 is that when a property owner has reinvested the sale proceeds into another property, the economic gain has not been realized in a way that generates funds to pay any tax. In other words, the taxpayer's investment is still the same, only the form has changed (e.g. vacant land exchanged for apartment building). Therefore, it would be unfair to force the taxpayer to pay tax on a "paper" gain.

The like-kind exchange under Section 1031 is tax-deferred, not tax-free. When the replacement property is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.