The term "sale and lease back" describes a circumstance in which an individual, typically a corporation, owning service residential or commercial property, either genuine or personal, 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 kind of deal is to enable the seller to rid himself of a big non-liquid financial investment without denying himself of the usage (during the regard to the lease) of essential or desirable buildings or devices, while making the net money proceeds available for other financial investments without turning to increased debt. A sale-leaseback deal has the fringe benefit of increasing the taxpayers readily available tax reductions, because the leasings paid are generally set at 100 percent of the worth of the residential or commercial property plus interest over the term of the payments, which leads to a permissible deduction for the worth of land along with buildings over a period which might be shorter than the life of the residential or commercial property and in specific cases, a reduction of a common 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 (given up residential or commercial property) and purchase more profitable and/or productive residential or commercial property (like-kind replacement residential or commercial property) while postponing Federal, and in a lot of cases state, capital gain and depreciation recapture earnings tax liabilities. This deal is most commonly referred to as a 1031 exchange but is also 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 defer all of their Federal, and in many cases state, capital gain and devaluation regain earnings tax liability on the sale of investment residential or commercial property so long as specific requirements are fulfilled. Typically, the Investor must (1) establish a contractual arrangement with an entity referred to as a "Qualified Intermediary" to facilitate the exchange and appoint into the sale and purchase contracts for the residential or commercial properties consisted of in the exchange