The term "sale and lease back" explains a circumstance in which an individual, typically a corporation, owning service residential or commercial property, either genuine or personal, sells their residential or commercial property with the understanding that the purchaser of the residential or commercial property will right away turn around and lease the residential or commercial property back to the seller. The goal of this kind of transaction is to make it possible for the seller to rid himself of a big non-liquid financial investment without depriving himself of the usage (during the regard to the lease) of essential or desirable buildings or devices, while making the net cash proceeds available for other investments without turning to increased financial obligation. A sale-leaseback transaction has the extra advantage of increasing the taxpayers available tax deductions, because the leasings paid are usually set at 100 percent of the worth of the residential or commercial property plus interest over the regard to the payments, which leads to an acceptable reduction for the value of land along with structures over a period which might be much shorter than the life of the residential or commercial property and in particular cases, a reduction of a normal loss on the sale of the residential or commercial property.

What is a tax-deferred exchange?

A tax-deferred exchange allows an Investor to offer his existing residential or commercial property (given up residential or commercial property) and purchase more successful and/or efficient residential or commercial property (like-kind replacement residential or commercial property) while deferring Federal, and most of the times state, capital gain and devaluation recapture income tax liabilities. This deal is most frequently described as a 1031 exchange however is likewise referred to as a "delayed exchange", "tax-deferred exchange", "starker exchange", and/or a "like-kind exchange". Technically speaking, it is a tax-deferred, like-kind exchange pursuant to Section 1031 of the Internal Revenue Code and Section 1.1031 of the Department of the Treasury Regulations.

Utilizing a tax-deferred exchange, Investors may postpone all of their Federal, and in many cases state, capital gain and devaluation recapture earnings tax liability on the sale of investment residential or commercial property so long as certain requirements are fulfilled. Typically, the Investor must (1) establish a legal arrangement with an entity referred to as a "Qualified Intermediary" to help with the exchange and assign into the sale and purchase contracts for the residential or commercial properties included in the exchange