The Magic of 1031 Compounding

The Magic of 1031 Compounding.

The true power of a 1031 exchange is the ability to meet your investment objectives without losing equity to taxation. With more money, you’ll compound returns faster, generating wealth that appears almost unbelievable to you today.

This table demonstrates the impact of taxes on compounding. The same transactions, the same returns each time (50% return on equity). The only difference between the middle column and the right column is deciding to 1031 versus not. At the end, after 20 transactions, 1031s net you $292 million more. This is the power of tax-free compounding. This is the magic of 1031s.

Starting Equity

$100,000

Transaction 1

$150,000

$135,000

Transaction 2

$225,000

$182,250

Transaction 3

$337,500

$246,038

Transaction 4

$506,250

$332,151

Transaction 5

$759,375

$448,403

Transaction 6

$1,139,063

$605,345

Transaction 7

$1,708,594

$817,215

Transaction 8

$2,562,891

$1,103,240

Transaction 9

$3,844,336

$1,489,375

Transaction 10

$5,766,504

$2,010,656

Transaction 11

$8,649,756

$2,714,385

Transaction 12

$12,974,534

$3,664,420

Transaction 13

$19,461,951

$4,946,967

Transaction 14

$29,192,926

$6,678,405

Transaction 15

$43,789,389

$9,015,847

Transaction 16

$65,684,084

$12,171,393

Transaction 17

$98,526,125

$16,431,381

Transaction 18

$147,789,188

$22,182,364

Transaction 19

$221,683,782

$29,946,192

Transaction 20

$332,525,673

$40,427,359

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