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The term "sale and lease back" describes a circumstance in which a person, usually a corporation, owning service residential or commercial property, either real or individual, offers their residential or commercial property with the understanding that the purchaser of the residential or commercial property will immediately reverse and lease the residential or commercial property back to the seller. The aim of this kind of deal is to make it possible for the seller to rid himself of a big non-liquid investment without denying himself of the use (throughout the regard to the lease) of required or desirable buildings or equipment, while making the net money proceeds available for other financial investments without turning to increased financial obligation. A sale-leaseback transaction has the fringe benefit of increasing the taxpayers offered tax deductions, because the rentals paid are usually set at 100 percent of the value of the residential or commercial property plus interest over the term of the payments, which leads to an acceptable deduction for the value of land along with structures over a period which might be much shorter than the life of the residential or commercial property and in particular cases, a deduction of a normal loss on the sale of the residential or commercial property.

What is a tax-deferred exchange?

A tax-deferred exchange permits an Investor to offer his existing residential or commercial property (relinquished residential or commercial property) and acquire more profitable and/or efficient residential or commercial property (like-kind replacement residential or commercial property) while postponing Federal, and in many cases state, capital gain and devaluation regain income tax liabilities. This transaction is most typically referred to as a 1031 exchange however is also understood as a "delayed exchange", "tax-deferred exchange", "starker exchange", and/or a "like-kind exchange". Technically speaking, it is a tax-deferred, like-kind exchange pursuant to Section 1031 of the Internal Revenue Code and Section 1.1031 of the Department of the Treasury Regulations.

Utilizing a tax-deferred exchange, Investors may postpone all of their Federal, and most of the times state, capital gain and devaluation regain income tax liability on the sale of financial investment residential or commercial property so long as particular requirements are met. Typically, the Investor needs to (1) develop a legal plan with an entity described as a "Qualified Intermediary" to facilitate the exchange and appoint into the sale and purchase contracts for the residential or commercial properties consisted of in the exchange