investopedia.com
The term “sale and lease back” explains a scenario in which an individual, normally a corporation, owning company residential or commercial property, either genuine or individual, offers their residential or commercial property with the understanding that the buyer of the residential or commercial property will right away reverse and lease the residential or commercial property back to the seller. The objective of this type of deal is to enable the seller to rid himself of a big non-liquid investment without depriving himself of the use (throughout the term of the lease) of required or desirable buildings or devices, while making the net cash proceeds readily available for other investments without turning to increased debt. A sale-leaseback deal has the fringe benefit of increasing the taxpayers available tax deductions, since the leasings paid are generally set at 100 percent of the value of the residential or commercial property plus interest over the regard to the payments, which results in an acceptable deduction for the worth of land in addition to 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 regular loss on the sale of the residential or commercial property.

What is a tax-deferred exchange?

A tax-deferred exchange enables an Investor to offer his existing residential or commercial property (relinquished residential or commercial property) and buy more profitable and/or efficient residential or commercial property (like-kind replacement residential or commercial property) while deferring Federal, and in many cases state, capital gain and depreciation recapture earnings tax liabilities. This deal is most commonly referred to as a 1031 exchange however is also referred to as a “postponed 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 delay all of their Federal, and in many cases state, capital gain and devaluation regain income tax liability on the sale of investment residential or commercial property so long as certain requirements are satisfied. Typically, the Investor must (1) develop a contractual plan with an entity referred to as a “Qualified Intermediary” to facilitate the exchange and designate into the sale and purchase agreements for the residential or commercial properties included in the exchange