How Long After an Exchange can a Spouse Gift a Replacement Property to Their Spouse?

How long after an exchange can a spouse transfer a replacement property (acquired to complete a 1031 exchange) to their spouse? Ideally, you want to wait 24 months after completing the exchange. The title-holding spouse completing the 1031 exchange must “intend” to hold the replacement property for investment or business purposes rather than for a gratuitous (gifting) purposes.

26 USC 1041 - Transfers of Property Between Spouses – allows for tax-free transfers of property between married spouses, so it will not cause a gain.

The core issue is about “holding for investment and business purposes” after completing the exchange, and “continuity of investment.” Generally, a taxpayer's intent regarding the property acquired in an exchange has to be to keep the property acquired, and intend to do so with an investment purpose. Regals Realty Co. v. Commissioner, 127 F.2d 931, 933-34 (2d Cir. 1942).  The safe answer is the longer it is held for the qualified use…the better. In IRS Rev. Proc.  2008-16, The Service looks at two 12-month periods to determine if a property is held for a qualified purpose.

The IRS and federal courts may examine all of the facts and circumstances surrounding the transaction to determine the taxpayer's true intent at the time of the exchange. See Reesink v. Commissioner, No. 2475-10, 2012 Tax Ct. Memo, at 1 (T.C. Apr. 23, 2012). See also Goolsby v. Comm’r, T.C. Memo 2010-64 (T.C. 2010). See also Danielson v. Comm’r of Revenue, 2013 Minn. Tax, 2013. See also Johnson v. Comm’r of Revenue, 2014 Minn. Tax, 2014.

Reach out to CPEC1031, LLC Today

Reach out to the professionals at CPEC1031, LLC today to discuss the specific details of your next like-kind exchange of real estate. Our team of qualified intermediaries can guide you through the entire process of your 1031 exchange, from the sale of your relinquished property to the acquisition of your replacement property. We have over two decades of experience working with owners of investment real estate who want to defer their capital gains taxes and keep their money working for them. Contact us today to learn more!

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

RSVP For Our Upcoming 1031 Exchange Workshop

BASIC NUTS AND BOLTS OF I.R.C. SECTION 1031

Come learn all about the basics of I.R.C. Section 1031 in a fun and interactive workshop!

Join us for an informative event where we dive into the basics of I.R.C. Section 1031. Learn all about the ins and outs of like-kind exchanges and how they can benefit your investments. Whether you're a seasoned investor or just starting out, this event is perfect for anyone looking to expand their knowledge in this area.

• When: Thursday, April 24, 2025, 9:30AM - 11:30AM (9:00 AM - Check in & Networking)

• Where: 12 Elton Hills Dr NW, Rochester, MN 55901-3538

Earn 2 Hours of Continuing Education (CE) Credit: Approved by the Minnesota Department of Commerce – Standard Real Estate Credits

Don't miss out on this opportunity to gain valuable insights and network with other professionals in the field!

Seating is limited. Be sure to reserve your spot by RSVPing via the link below:

1031 Exchange Resources

The qualified intermediaries at CPEC1031, LLC are your go-to resource for all things related to like-kind exchanges of investment real property. With over twenty years of experience, our team is here to help you through all the steps of your next 1031 exchange. Let us help you defer capital gains taxes on the sale of real estate through section 1031 of the Internal Revenue Code. Our team has helped countless taxpayers successfully execute 1031 exchanges and we can help you! Reach out to us today to set up a time to chat with a qualified intermediary near you!

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Reasons to Seriously Consider a 1031 Exchange in 2025

There are many excellent reasons to conduct a 1031 exchange of investment real estate, but many taxpayers are unaware of these benefits. In this article, we are going to outline a couple reasons to consider a 1031 exchange in the year 2025.

Defer Your Capital Gains Tax Burden

The biggest benefit of a 1031 exchange is capital gains tax deferral. When you sell a piece of investment real estate in a straight forward sale, you are likely going to be hit with a huge capital gains tax bill. In fact, this is something that prevents many taxpayers from selling their property at all. Section 1031 offers the excellent incentive of tax deferral when you reinvest the net proceeds into a replacement property.

Move to a Different Location

1031 exchange can be conducted between properties in any location within the bounds of the United States. You can exchange out of a property in Minnesota and into a property in Arizona, so long as you meet all the requirements of section 1031. This is a great way to set yourself up for a move to a different location, while deferring a large capital gains tax bill.

Minnesota-Based Qualified Intermediaries

At CPEC1031, LLC, our Minnesota-based qualified intermediaries are here to help you defer capital gains taxes using section 1031 of the Internal Revenue Code. This powerful tax provision can help you keep your hard-earned money working for you in a continuation of investment. The best part is that any US taxpayer can utilize section 1031 for tax deferral. Contact our 1031 professionals today at our downtown Minneapolis offices to learn more about the process and how we can help you save money on your next sale of investment real estate.

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Tax Documents to Compile After Completing a 1031 Exchange

After completing your 1031 Exchange, what documents should you provide to your tax preparer to complete your tax return?

Your Certified Public Accountant (CPA) or tax accounting preparer will need specific information to verify and substantiate the details provided to the Internal Revenue Service (IRS) on IRS Form 8824.

Here’s a checklist of essential documents you can easily provide to expedite the completion of your tax return:

• Close-out letter from your qualified intermediary summarizing the 1031 exchange, detailing how your funds were utilized and the closing dates.

• PDF copy of the final signed Relinquished Property Closing Statement from the sale of your old investment or business real estate.

• PDF copy of the deed or other transfer document conveying ownership of the Relinquished Property to the purchaser.

• If you received a 1099-S from the closing agent, title closing, escrow officer, law firm, or individual responsible for the transaction, provide it to your CPA or tax accounting preparer. This document serves as proof of the gross proceeds from the sale or the cash you were entitled to receive as the transferor, potentially confirming the closing date.

• If you’re incurring unusual or non-standard transactional expenses or making financial concessions to the purchaser as per the terms of the sale contract (with any applicable amendments) with the buyer, you should also provide a PDF copy of the sale contract (purchase agreement). This document demonstrates your obligation to pay these transactional expenses or financial concessions, such as a repair allowance or partial rebate of the purchase price.

If you sent a 1031 replacement property identification form to your qualified intermediary or another party involved in the transaction during the 45-day identification period, you must provide a PDF copy of the final signed and sent document. This document should include information and confirmation that it was properly and timely sent. Additionally, it may be beneficial to include an acknowledgment of receipt.

The PDF copy should include the following:

• A PDF copy of the final signed replacement property closing statement from the sale of your old investment or business real estate.

• A PDF copy of the replacement property deed or other transfer document through which you received the ownership of the replacement property from the seller.

• Any corrected or changed documents that may have occurred after the closings, such as refunds for improperly calculated payoffs of real property taxes or mortgages, deeds of trust, or closing charges.

• A PDF copy of all of your fully signed 1031 documents, including your exchange agreement, assignment agreements, notices, and written verification of the use or return of unused 1031 exchange funds (if applicable).

Qualified Intermediaries Near You

Find a qualified intermediary near you to get your 1031 exchange questions answered. CPEC1031, LLC has been facilitating like-kind exchanges under section 1031 for more than two decades. Our skilled 1031 exchange professionals are here to guide you through the complex 1031 exchange process and make sure you have all your bases covered throughout the scope of your exchange. Contact us today at our downtown Minneapolis office to learn more about the services we offer and how we can help with your next 1031 exchange of investment real estate.

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Can I Get Reimbursed for my Pre-Closing Repair Costs in a 1031 Exchange?

Pre-closing repair costs are not generally considered allowable transactional expenses unless they are contractual confessions made in the purchase agreement for the buyer.

You could take some taxable boot at the closing to reimburse yourself for these pre-closing repair costs…your CPA or accountant may be okay with a partially tax deferred exchange as the pre-closing repair costs are probably all tax deductible in the year of expenditure, so it’s potentially kind of a wash.

Or, you could do a 100% tax deferred exchange, and later refinance the Replacement Property in a separate later loan transaction to pull out equity later to pay yourself back.

In general, the expenses listed below can be paid at the 1031 exchange closing:

• Broker’s commissions

• Exchange fees

• Title insurance fees for the owner’s policy of title insurance

• Escrow fees / Closing Fees

• Appraisal fees required by the purchase contract

• Transfer taxes

• Recording fees

• Professional service fees such as CPA/accounting fees, attorney’s fees and financial planner charges incurred in connection with the sale or purchase of the relinquished property or replacement property

Contact a 1031 Intermediary

Are you interested in learning more about the tax-saving benefits of section 1031 of the Internal Revenue Code? Contact a qualified intermediary at CPEC1031, LLC today to get all of your questions answered. Our team of like-kind exchange intermediaries can help you through all the stages of your next 1031 exchange – ensuring you have all the information you need to make your exchange a success. We have more than twenty years of experience in the 1031 exchange industry and have helped countless taxpayers defer capital gains taxes under section 1031.

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved