Many taxpayers wonder: “Can you pay down debt on a Replacement Property you’ve already acquired in order use up all of your 1031 exchange funds?” In this article, we’re going to talk about some planning tips for protecting your 1031 exchange in this type of scenario.
1031 Exchange Planning Tips
If you find yourself in this 1031 exchange position, there are some strategies to protect yourself and your exchange, such as:
Holding off on closing on your more certain Replacement Property purchases until you have decided if you can buy the other less certain Replacement Properties…thus keeping your options open as to how much of your 1031 funds you will apply to the first purchases until you know if the other Replacement Properties will work out.
Doing a reverse exchange on the first Replacement Property purchases and having the title to the Replacement Property held by an E.A.T. (exchange accommodation title holder) that is owned by your Qualified Intermediary, until you have determined if the other Replacement Property will materialize.
Reverse 1031 Exchanges in Minnesota
With a reverse exchange, because the taxpayer is not the “owner” of the parked replacement property during the reverse exchange period, you maintain the option of applying all or a part of your remaining exchange funds to purchase and/or pay-down of the debt encumbering the parked replacement property BEFORE you actually receive the parked property from the E.A.T. to complete your 1031 exchange.
Contact a 1031 Exchange Company
At CPEC1031, LLC we have over twenty years of experience facilitating like-kind exchanges all over the united States. Contact us today to learn more about our services and how we can help you with your next 1031 exchange!
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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