1031 exchange scams can devastate investors

A recent report in the Wall Street Journal highlighted yet another 1031 exchange company that had stolen investors' funds and used them to fund an expensive lifestyle.

Thousands of real estate investors have used 1031 exchanges to defer capital gains and other taxes due when buying replacement investment property. When the rules are properly followed, a 1031 exchange -- also referred to as a Starker trust or Starker exchange -- allows a real estate investor to buy and sell real estate without having to pay any federal income taxes on the sale of the property. The payment of any taxes is deferred until the owner of the property dies or sells the property and does not use a 1031 exchange.

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