Now you can avoid the 1031 exchange pitfall.

One of the most widely used and successful tax savings strategies utilized by real estate owners today is the 1031 deferred exchange. Historically, real estate owners had the opportunity to defer taxable gain by rolling it over into replacement property. This is where the problems arise.

While the 1031 exchange is a very popular and beneficial tax savings technique, it has numerous downfalls. First and foremost, the property owner must find suitable replacement property in order to continue investing in real estate. Further difficulty originates from the strict requirements of locating replacement property within 45 days from the close of the sale escrow, and then closing on the replacement property within 180 days.

An exciting new alternative has resulted from recent rule changes. This new option is known as the Private Annuity Trust (PAT) sale. Through the use of a Private Annuity Trust, the property owner may sell a piece of real estate and defer his or her gain without purchasing new investment property, plus a host of other investment options. The property owner may also sell property and benefit from deferral through the use of a PAT, without being constrained by the 45 and 180-day rules of the 1031 exchange.

Although the deferred proceeds will ultimately be taxed, as in the 1031 exchange alternative, much more flexibility is achieved through this new and stirring option.