Back Leg & Front Leg Reverse Exchanges

Reverse exchanges are one type of 1031 exchange that are a bit more complicated than the traditional forward exchange. Due to their complexities it’s important to take extra care when dealing with a reverse exchange. In this article, we are going to talk about the details and benefits of back leg and front leg reverse exchanges.

Reverse Exchanges

• In a reverse exchange, the Exchange Accommodation Title holding Company (“ EAT ”) takes title to property and holds it for up to 180 days

• Compared to forward exchanges, reverse exchanges are more costly and complicated

BACK LEG – Parking the Replacement Property

• The exchangor must identify the relinquished properties that will be sold within 45 days.

• This gets the new property into your hands after you have closed on the sale of the Relinquished Property.

FRONT LEG – Parking the Relinquished Property

• Equity in replacement property must exist at the time of purchase equal to the amount of net proceeds that will result from the sale of the relinquished property.

• Deed Tax may be paid twice.

Contact CPEC1031

Contact the qualified intermediaries at CPEC1031 to start saving money on your next sale of commercial real estate. We have over twenty years of experience facilitating the 1031 exchange process for clients across the United States. To start the 1031 exchange process, reach out to our like-kind exchange intermediaries today. You can find us at our offices in downtown Minneapolis. We also work with clients throughout the state of Minnesota and across the country.

• 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.

© 2019 Copyright Jeffrey R. Peterson All Rights Reserved

Competing for 1031 Replacement Property in a Hot Real Estate Market

When the real estate market is hot, finding the right replacement property for your 1031 exchange is all the more difficult. Even when you do find a replacement property that you love, it may get snatched from beneath you before you can close the deal. In this article, we are going to offer some tips when competing for replacement property in a 1031 exchange.

The Reverse Exchange Option

If you are finding it hard to secure the replacement property you want; if all the properties you look at are getting snatched up by other buyers – then a reverse exchange is your best bet. With a reverse 1031 exchange, you can purchase your replacement property before you sell your relinquished property. This is essentially the opposite order of a typical 1031 exchange. Reverse exchanges are especially useful in hot real estate markets when properties are selling fast. A reverse exchange allows you to grab a replacement property without waiting until your relinquished property sale goes through. Then, within the following 180 days, you sell your relinquished property to complete the exchange.

Reverse Exchanges of Like-Kind Property

For more than twenty years, the 1031 exchange accommodators at CPEC1031 have been helping clients defer their taxes with section 1031 of the Internal Revenue Code. Let us help you prepare your documentation, and make sure you hit all of the necessary requirements. Reach out to the 1031 exchange professionals at CPEC1031 today to get your exchange off the ground. You can find us at our main office 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Does the New Tax Plan Allow Reverse 1031 Exchanges?

1031 exchange investors have been asking a lot of questions about the new tax overhaul that went into effect earlier this month. We’re here to answer any questions you may have! One query that we’ve been hearing a lot is whether or not reverse exchanges are still allowed under the new law. In this article, we’re going to talk about whether or not reverse 1031 exchanges are allowed under the new tax law.

Reverse 1031 Exchanges of Real Estate

The new tax law preserves 1031 real estate exchanges. That means forward exchanges, reverse exchanges, build-to-suit exchanges of real estate are still viable. If you are looking to do a real estate exchange and you find a perfect replacement property before selling your relinquished property – a reverse exchange can help you defer your capital gains taxes.

Reverse Personal Property Exchanges

The same is not true of personal property exchanges. Under the new tax law, personal property exchanges are no longer valid. That means reverse exchanges involving personal property are not allowed moving forward.

1031 Reverse Exchange Company in St. Paul, MN

The team of 1031 professionals at CPEC1031 has been helping taxpayers and investors with their like kind exchanges for decades. We have the knowledge and experience needed to guide you through the 1031 exchange process, prepare the necessary documents for your exchange, and answer all of your questions along the way. If you are interested in learning more about the tax-saving benefits of the like-kind exchange, don’t hesitate to reach out to us at our downtown Minneapolis office.

• Start Your Exchange: If you have questions about 1031 reverse exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

The Importance of Notifying Your Qualified Intermediary in a Reverse Exchange

If you do a reverse exchange and you have the intermediary park the replacement property and hold it for your benefit, eventually (within 180 days) you need to sell or dispose of that old relinquished property so you can then acquire the parked replacement property.

Pro Tip

Here’s a pro tip - before you sell your relinquished property you need to notify the qualified intermediary so that they can prepare the appropriate 1031 documents, notices, and closing instructions related to the sale of your relinquished property. Just because you parked the replacement property doesn't mean that the intermediary’s job is done as it relates to the sale of your old relinquished property.

Assemble Your Team

Bring in your team, assemble them early, and give everybody notice of what's going on so you can get the best result on your 1031 reverse exchange.

• Start Your 1031 Exchange: If you have questions about reverse 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Case Study: Doing a Partial Reverse Exchange

A client recently came to us with the following 1031 exchange situation and question: We are currently in the middle of our 1031 identification period. If we buy something now and sell another property after that in the same area is it possible to put the revenues from that toward the mortgage of that same property, or do we need to buy another individual property? The property we want is more than we wish to spend, but if we sold our other holding it would be more doable.

Doing a 2nd Potential Exchange

As to the second potential exchange of another relinquished property, generally, the IRS would not view paying off debt on a property that you already own as being an ‘exchange’ because you have not received anything new that you do not already own.

If the timing works, you could split the replacement property into a part reverse exchange, and hold out a portion of the replacement property to complete another 1031. Read more about this possibility here. 

• Start Your 1031 Exchange: If you have questions about 1031 identification periods, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved