Iron Man’s real name is Tony Stark. He is the beloved fictional head of Stark Industries, a billionaire playboy who helps the World fight the good fight.

The 1031 Exchange (Section 1031(a) of the Internal Revenue Code (26 U.S.C. § 1031)), also known as the Starker exchange, is a real life Internal Revenue Code loophole that enables us all to become billionaires and save the world. It draws its name from the legendary 1979 case Starker v. U.S. (602 F.2d 1341).

The IRS Code section says, in sum, the “exchange of certain types of property may defer the recognition of capital gains or losses due upon sale, and hence defer any capital gains taxes otherwise due.” (https://en.wikipedia.org/wiki/Internal_Revenue_Code_section_1031)

What does that mean?

For example, you may purchase real estate, hold it for a period of time, sell it and then purchase another “like/kind” property (often larger) and “defer” paying taxes on the original sale. While this is an unabashed oversimplification of what happens (there is a clear-cut and defined protocol one must follow to avoid taxation), it is essentially what happens, in a nutshell.

Think about it…

You purchase real estate for $500K, years later you sell it for $1 Million, and then buy a new piece of property for $1M and defer paying taxes on the sale. I say “defer” because ultimately you will have to pay taxes on the final sale. But the key is “on the final sale.”

The theory is twofold: your property appreciates in value, you keep buying more and more expensive property and keep “deferring” taxes until one day you have a $20 million property. At that time, you will gladly pay your capital gains tax because your wealth will be markedly larger.

Or…

You keep transferring properties forever.

It is single handedly the greatest tax advantage (not a loophole) in the IRS Code, and yet still few people know about it.

Tony Stark is a cunning, erudite, mastermind. The Starker Exchange is your legal vehicle to become the same.

Be your own Iron Man.