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The term "sale and lease back" describes a scenario in which an individual, typically a corporation, owning business residential or commercial property, either genuine or individual, sells their residential or commercial property with the understanding that the purchaser of the residential or commercial property will immediately reverse and lease the residential or commercial property back to the seller. The objective of this type of deal is to make it possible for the seller to rid himself of a large non-liquid investment without depriving himself of the usage (throughout the regard to the lease) of necessary or desirable structures or devices, while making the net cash earnings readily available for other investments without turning to increased debt. A sale-leaseback transaction has the fringe benefit of increasing the taxpayers available tax deductions, because the leasings paid are generally set at 100 per cent of the value 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 buildings over a period which might be shorter than the life of the residential or commercial property and in particular 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 permits an Investor to offer his existing residential or commercial property (relinquished residential or commercial property) and acquire more rewarding and/or efficient residential or commercial property (like-kind replacement residential or commercial property) while postponing Federal, and in many cases state, capital gain and depreciation recapture income tax liabilities. This transaction is most frequently 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 delay all of their Federal, and in many cases state, capital gain and income tax liability on the sale of investment residential or commercial property so long as particular requirements are fulfilled. Typically, the Investor should (1) develop a legal plan with an entity referred to as a "Qualified Intermediary" to assist in the exchange and assign into the sale and purchase contracts for the residential or commercial properties included in the exchange