An exchange is rarely a simultaneous swap of properties between two parties. Most exchanges, whether they are simultaneous or delayed involve three parties: the investor (exchanger) who is doing the exchange, the buyer who is purchasing the exchanger’s old (relinquished) property and the seller who is selling the exchanger a new (replacement) property.

Whether the investor’s property is owned free and clear or encumbered, the benefits of a tax-deferred exchange are significant. The tax dollars saved by doing an exchange can be utilized to purchase additional investment property. Compare a sale versus an exchange.

In addition to deferring the capital gains tax, tax-deferred exchanges provide the investor with a wide range of non-tax opportunities to suit the investor’s portfolio. These can include reposition of  assets, change of property types, increase leverage, and much more.