The word “exchange” is an important part of the Internal Revenue Code section regarding 1031 exchanges. If you’re going to do a 1031 exchange, that generally means you have to acquire something new that you didn’t already own prior to starting the like-kind exchange.
Property Ownership
The easiest and safest way to conduct a 1031 exchange is to buy property that you do not already own from an unrelated third party. It’s not a good idea to take the sales proceeds from the disposition of your relinquished property and pay off debt on property that you already own. The IRS likely will not view that as an exchange under section 1031.
For many years the IRS took the position that building improvements on land that you already owned did not qualify for 1031 exchange treatment. There have since been a few private letter rulings that soften this position a little bit, but even so, this is a very tricky category of 1031 exchange. As such, if you find yourself in this position, it’s important to work with the best and the brightest – your qualified intermediary, accountant, attorney, banker, and more.
1031 Exchange Company in Minnesota
CPEC1031, LLC is a Minnesota-based 1031 exchange company providing like-kind exchange services to taxpayers throughout the United States. Our qualified intermediaries have over twenty years of experience working on exchanges of all shapes and sizes. We are fully equipped to help you through the details of your next 1031 exchange transaction. Contact us today at our Minneapolis office to learn more about how we can help.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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