Selling Real Estate After Converting From C-Corp to S-Corp? Check the Calendar First

If you have converted from a C corporation to an S corporation it’s important to check the calendar before you sell appreciated real estate.

IRC section 1374 generally creates a five-year recognition period during which pre-conversion built-in gain can still trigger a corporate-level tax. However, selling isn't your only option. A 1031 exchange may provide another path for appreciated real estate.

For qualifying real estate, a 1031 exchange may allow the S corporation to reposition the real property without recognizing that gain today. The built-in gain then carries into the new replacement property through the remaining recognition period.

Before you sell your property, know when the S-corp election became effective. A 1031 exchange may give you another path.

As always, it’s important to work closely with your tax advisor (CPA or accountant) throughout your 1031 exchange. Doing so will set you up for a successful, tax-deferred exchange and help you avoid any avoidable pitfalls that could derail your exchange.

Section 1031 – Your Ticket to Tax Deferral

Section 1031 of the Internal Revenue Code is your ticket to capital gains tax deferral. With a 1031 exchange, you can sell a relinquished property, reinvest your proceeds into a replacement property, and defer your capital gains taxes in the process. At CPEC1031, LLC we have decades of experience facilitating like-kind exchanges in Minnesota and across the United States. Let us help you through the ins and outs of the 1031 exchange process. We can answer your questions, help prepare documentation, and make sure you are well positioned to defer 100% of your capital gains tax burden.

• 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

Does Seller Financing Rule Out a 1031 Exchange?

Many taxpayers ask the question: if my transaction involves seller financing, does that rule of the option of doing a 1031 exchange?

The short answer is: not necessarily.

If you sell investment real estate and agree to receive part of the purchase price over time through a promissory note or installment arrangement, a 1031 exchange may still be possible. However, this situation may complicate the exchange because the seller typically wants to reinvest all of the equity into the replacement property to maximize their capital gains tax deferral.

The good news is a 1031 exchange isn’t an all or nothing game. Depending on the numbers, a partial tax-deferred exchange may still be an option. Or, a seller may be able to bring additional cash to the replacement purchase to make up the shortfall and pursue full tax deferral.

The key is to run the numbers prior to closing and involve your tax advisor early in the process to avoid any potential issues.

Get Help Throughout the 1031 Exchange Process

Section 1031 of the Internal Revenue Code is available for all US taxpayers to take advantage of. With it, you can defer capital gains taxes on the sale of qualifying real estate as long as you redeploy your net proceeds into a replacement property of equal or greater value. Work with a qualified intermediary from CPEC1031, LLC on your next exchange of like-kind property and start deferring your capital gains taxes today. Contact us at our Minneapolis office to learn more about the benefits of section 1031 and see how we can help you through the 1031 exchange process.

• 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

Why Year-End Timing Matters in a Reverse 1031 Exchange

Timing is an essential element of any 1031 exchange. It’s one of the most common things that can trip up investors and result in failed exchanges. In this article, we are going to discuss why year-end timing is so important when conducting a reverse 1031 exchange of real estate.

When a Reverse 1031 Exchange Straddles Two Years

When a reverse 1031 exchange crosses over from one year to the next, it can create a depreciation surprise.

For example, let’s say you acquire a replacement property and park it with and Exchange Accommodation Titleholder (EAT) in 2025. However, the exchange stretches into the next year and does not complete until 2026. In this scenario, the exchanger typically does not begin depreciation simply because the property was acquired in the year 2025.

That’s because during the parking period, the EAT is generally treated as the beneficial owner for federal income tax purposes.

In any 1031 exchange, the documents and facts matter. It’s important to consult with your tax advisor to determine when depreciation begins.

Find the Right Intermediary for Your 1031 Exchange

A 1031 exchange can get quickly become complicated if you are unprepared. Working with a qualified intermediary who understands your situation is the best way to set yourself and your exchange up for success. At CPEC1031, LLC we have decades of experience working with taxpayers on their 1031 exchange transactions. No matter where your exchange is taking place, we can help you through the process and help ensure you are set up to defer 100% of your capital gains tax burden. Contact us today at our downtown Minneapolis office to learn more about our services and see how we can help!

• 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

Understanding Basis in a 1031 Exchange

A 1031 exchange allows you to defer your capital gains taxes, but what happens to your tax basis in a 1031 transaction?

Generally, the 1031 exchange replacement property does not start with a brand-new basis equal to its purchase price. Instead, the basis from the relinquished property carries forward, with adjustments for things like additional investment and any gain recognized.

This is important to consider because your basis can impact:

• future depreciation deductions

• the gain you may recognize when you eventually sell

• the overall long-term tax impact of the exchange

If you are buying replacement property for more than you sold the relinquished property, the additional investment may also create additional basis.

Before you begin your 1031 exchange, it’s important to know your basis. Work with your accountant or CPA, and ask them to confirm the adjusted tax basis of the property you are selling. This will help you understand what your basis may look like after the exchange.

Find a 1031 Qualified Intermediary

Before beginning your 1031 exchange, it’s always a good idea to consult with a qualified intermediary. At CPEC1031, LLC our intermediaries can help you strategize and set your exchange up for success. With over twenty years of experience facilitating 1031 exchanges of all shapes and sizes, we have the skills necessary to make sure your exchange goes smoothly. Contact us today to learn more about the 1031 exchange process and see if your property is a good fit for 1031 exchange treatment. You can find us at our primary office located in downtown Minneapolis.

• 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

Why a Son-in-Law is Not Automatically a “Related Party” for 1031 Exchange Purposes

When it comes to 1031 exchanges, you are barred from exchanging property with “related parties.” Most people assume that means you can’t exchange with anyone you are directly related to, but the rules are a bit more nuanced than that. For example, your 𝘀𝗼𝗻-𝗶𝗻-𝗹𝗮𝘄 is family but that does not automatically make him a “𝗿𝗲𝗹𝗮𝘁𝗲𝗱 𝗽𝗮𝗿𝘁𝘆” for Section 1031 purposes. We talk about why that is in this article.

Family Relationships

The tax code spells out what exactly constitutes a related party for 1031 purposes, and a son-in-law is not automatically defined as a related party. By family relationship alone, a son-in-law is not a brother, sister, spouse, ancestor, or lineal descendant. That being said, your son-in-law could still be related through a separate ownership or entity relationship.

Entity Relationships

Certain entity relationships can also create related-party status in a 1031 exchange. Under section 1031, a corporation and a partnership may be related if the same persons own more than 50% of the corporation and more than 50% of the partnership capital or profits interest.

1031 Exchange Services For Taxpayers Across the United States

At CPEC1031, LLC we provide 1031 exchange services to taxpayers across the United States, with our primary office located in Minneapolis, MN. With more than twenty years of experience in the 1031 exchange industry, our team of qualified intermediaries has the skills necessary to take your 1031 exchange across the finish line. We can advise you on the rules and requirements of section 1031, prepare your 1031 documentation, and make sure you are well-equipped to defer your capital gains tax burden. Contact us today to chat about 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved