Accruit is seeing more and more California construction companies utilizing 1031 exchanges to sell off old equipment. These outdated assets don't meet California's strict new emissions laws so companies are buying new, greener replacement equipment.Everyone agrees that going green is good for the environment, but the cost of doing so can take a bite out of a company's bottom line. For example, if a demolition company sells just one fully depreciated loader for $60,000, they're going to owe the IRS approximately $21,000 in taxes.
In other words, it's costing a lot of green to go green
This isn't the case if they do a 1031 exchange, though. An exchange will allow this company to apply that $21,000 - which they would have normally paid to the IRS - to a new loader. This is called leverage, and it is one of the great benefits of the 1031 exchange. Having this money available to purchase new equipment can also negate the need for a lender.
So go ahead - go green and save some green at the same time.