A holding company or qualified intermediary offers real estate investors an option to paying capital gains tax after selling one property and waiting for a desired property to become ready for purchase.

"It doesn't avid the gain forever," said James Havens, partner in the Columbus law firm of Havens Willis LLC and president of the Cardinal Title Agency, a licensed commercial real estate title insurance company. But the Internal Revenue Service does allow the investor to literally hold the transaction for up to 180 days without paying capital gains as part of a 1031 Exchange.

Identification of a similar property in which to reinvest must be made within 45 days, beginning at the closing of the relinquished property.

The process is best suited for commercial investors, Havens said.

"The motivation to do it only exists if you're in the commercial real estate business," Havens said. If conditions of the 180-day period cannot be met, "You report the gain", he said.

According to the Pottstown, Pa.-based 1031 Corp. Inc., the IRS Code 1031, which was significantly clarified by the IRS last year, provides that no gain or loss will be recognized on the exchange of any type of business use or investment property for any other business use or investment property.

1031 Exchanges are complicated and have created a niche market for firms such as Cardinal Title to work as a qualified intermediary.

"We are 100 percent responsible to do what (the investor) directed us to do," Havens said. "We've closed at least $300 million of transactions in the last three tax years."

Shhh. Do details, please - But holding companies have more uses than 1031 exchanges.

A holding company can legally keep real estate transactions from being reported in public record to protect the buyer's anonymity.

"People may be embarrassed about how much they pay for a house," Havens said. Also, the buyer may not want the seller to know who's buying the property, especially if the buyer is particularly wealthy yet still negotiating for the best deal.

"It's a wonderful convenience," said Havens. Particularly in the case of multiple condominium sales, a holding company can handle many transactions simultaneously, which would otherwise be terribly time-consuming for the client.

But, John Vorys, partner in the Columbus law firm of Vorys Sater Seymour & Pease LLP, which has more than 350 employees, said holding companies have a corporate, and possibly more abstract, role as well. "(A holding company) makes acquisitions and divestiture easier," Vorys said.

Holding companies can provide for the formation of liability firewalls. An example Vorys said, was a trucking company looking to venture into sand and gravel transportation.

The trucking company, wanting to protect itself from any liability that could be associated with the sand and gravel business, formed an independent company, or subsidiary.

Any instances of liability stop with the subsidiary, and the holding company (in this case the trucking company) remains legally protected as long as corporate formalities are met. In other cases, subsidiaries are often easier to manage when they remain independent from their holding companies.

Vorys said the corporate uses for holding companies are numerous, but so specific to the corporate community the public generally is unaware, unaffected or disinterested.