The term "sale and lease back" explains a circumstance in which an individual, normally a corporation, owning service residential or commercial property, either genuine 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 aim of this type of transaction is to enable the seller to rid himself of a big non-liquid investment without denying himself of the use (throughout the regard to the lease) of necessary or desirable structures or equipment, while making the net cash proceeds offered for other financial investments without resorting to increased debt. A sale-leaseback transaction has the extra benefit of increasing the taxpayers readily available tax deductions, due to the fact that the rentals paid are usually set at 100 per cent of the value of the residential or commercial property plus interest over the regard to the payments, which results in an allowable deduction for the worth of land as well as buildings over a duration which may be much shorter than the life of the residential or commercial property and in specific cases, a reduction of a normal loss on the sale of the residential or commercial property.
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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 purchase more successful and/or productive residential or commercial property (like-kind replacement residential or commercial property) while postponing Federal, and in the majority of cases state, capital gain and depreciation recapture earnings tax liabilities. This deal is most typically described 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 for the most part state, capital gain and devaluation regain earnings tax liability on the sale of financial investment residential or commercial property so long as particular requirements are satisfied. Typically, the Investor needs to (1) develop a contractual arrangement with an entity referred to as a "Qualified Intermediary" to help with the exchange and designate into the sale and purchase agreements for the residential or commercial properties included in the exchange