The term "sale and lease back" explains a scenario in which a person, usually a corporation, owning organization residential or commercial property, either genuine or personal, offers their residential or commercial property with the understanding that the buyer of the residential or commercial property will immediately turn around and lease the residential or commercial property back to the seller. The objective of this kind of deal is to make it possible for the seller to rid himself of a large non-liquid financial investment without denying himself of the usage (during the term of the lease) of needed or desirable buildings or devices, while making the net cash profits available for other investments without resorting to increased debt. A sale-leaseback transaction has the extra advantage of increasing the taxpayers available tax reductions, due to the fact that the leasings paid are typically set at 100 per cent of the worth of the residential or commercial property plus interest over the regard to the payments, which leads to an acceptable reduction for the value of land along with structures over a period which might be shorter than the life of the residential or commercial property and in certain cases, a deduction of a regular loss on the sale of the residential or commercial property.
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What is a tax-deferred exchange?

A tax-deferred exchange enables a Financier to offer his existing residential or commercial property (given up residential or commercial property) and acquire more lucrative and/or productive residential or commercial property (like-kind replacement residential or commercial property) while deferring Federal, and in many cases state, capital gain and devaluation regain income tax liabilities. This transaction is most frequently described as a 1031 exchange but is also called a "postponed 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 recapture income tax liability on the sale of investment residential or commercial property so long as certain requirements are satisfied. Typically, the Investor should (1) establish a contractual plan with an entity referred to as a "Qualified Intermediary" to help with the exchange and designate into the sale and purchase contracts for the residential or commercial properties included in the exchange