The term "sale and lease back" explains a scenario in which an individual, generally a corporation, owning company residential or commercial property, either real or personal, sells their residential or commercial property with the understanding that the purchaser of the residential or commercial property will right away turn around and lease the residential or commercial property back to the seller. The goal of this type of transaction is to allow the seller to rid himself of a large non-liquid investment without depriving himself of the use (during the regard to the lease) of required or desirable structures or devices, while making the net cash profits readily available for other financial investments without resorting to increased financial obligation. A sale-leaseback transaction has the additional benefit of increasing the taxpayers offered tax deductions, since the leasings paid are typically set at 100 per cent of the value of the residential or commercial property plus interest over the regard to the payments, which leads to a permissible deduction for the value of land along with buildings over a period which might be much shorter than the life of the residential or commercial property and in certain cases, a reduction of an ordinary loss on the sale of the residential or commercial property.

What is a tax-deferred exchange?
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A tax-deferred exchange enables a Financier to offer his existing residential or commercial property (relinquished residential or commercial property) and acquire more successful and/or efficient residential or commercial property (like-kind replacement residential or commercial property) while deferring Federal, and most of the times state, capital gain and depreciation regain earnings tax liabilities. This transaction is most commonly referred to as a 1031 exchange but is also referred to as 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 delay all of their Federal, and most of the times state, capital gain and depreciation recapture income tax liability on the sale of financial investment residential or commercial property so long as specific requirements are met. Typically, the Investor must (1) establish a legal plan with an entity referred to as a "Qualified Intermediary" to assist in the exchange and appoint into the sale and purchase contracts for the residential or commercial properties consisted of in the exchange