If you want your 1031 exchange to be clean and simple, avoid seller back financing on the sale of your relinquished property. If you receive a note or IOU from the buyer, that is going to be considered boot.
There are work arounds wherein you can have the note run in favor of the qualified intermediary and then later have the qualified intermediary sell that note for cash to get all cash in the exchange account. However, the conservative play here is to run the note to the intermediary so that the intermediary is receiving all of the cash and non-cash proceeds. That is the best way to avoid jeopardizing your exchange. The even safer play is to not do seller back financing at all.
Compound Your Wealth with a Like-Kind Exchange
A 1031 exchange of investment real estate allows you to compound your wealth over time. Rather than pay a hefty capital gains tax bill when selling investment real estate, exchange the property for bigger and better replacement property and defer your capital gains tax burden in the process. With the help of a qualified intermediary, the 1031 exchange process is efficient and effective. Reach out to the intermediaries at CPEC1031, LLC today to discuss the details of your next like-kind exchange of real estate. We have more than twenty years of experience in the 1031 exchange industry and 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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