Ok, so you can defer paying taxes. When do you ultimately pay the tax bill?
There are a few possible exit strategies. Sometimes Congress lowers the capital gains tax rate, and when that happens an asset-selling window opens. The rate was 15 percent for awhile. If you have been using the 1031 Exchange program and have millions in equity, you can sell and pay just 15 percent.
Another option is more long-term. For example, let’s say a couple has been exchanging their whole life and own $1.5 million of current market-value property with $500,000 in property appreciation over the years. When one person dies, the surviving spouse is able to evaluate the property at the time of death, and “step up” the tax basis to the current $1.5 million valuation – capital gains free.
There are other options: trusts and other tax tools that can balance out the taxes. Make sure you have a good, educated accountant to learn more.