If your investments lie in personal property such as collectible cars or other antiques, you may wonder whether the power of section 1031 can somehow be used to your advantage, and rightfully so, as the sale of collectible property incurs a whopping 28% capital gains liability. Luckily, the answer is yes; though not many are aware of the possibility, 1031 can be made on certain types of personal property, including classic cars, and in light of capital gains rates, those with money in these kinds of investments stand to benefit greatly from the use of section 1031.

Making a 1031 exchange on a car, or, indeed, any sort of antique or collectible, allows you to turn that 28% percent tax liability into a tax deferral, a kind of loan from the government, but one that accrues no interest. This deferral is transferred from one piece of property to the next as long as you continue to exchange, and is collected when you decide to sell outright rather than making another exchange.

If this has changed your mind about selling your classic car investment up front, you should be aware of one key difference between a real estate exchange and a personal property exchange: in your case, the like-kind requirements will be more stringent, so your car must be exchanged for another car of equal or greater value; you cannot exchange, for example, a car for an airplane or a tractor.

You'd be right, but you'd do well to consider the possibility of a 1031 exchange. A 28% capital gains tax represents a large portion of your profits, and if you're like me, you'll take the option that allows you to reinvest that money, maximizing your potential profits.

United States property investors can save big money by utilizing a 1031 exchange to defer all of their capital gains tax on the sale of investment property. A 1031 tax exchange  is like an interest free loan from Uncle Sam!