Minnesota generally conforms to the federal internal revenue rules for 1031 real property exchanges. There is not any special withholding, follow-up tax reporting in subsequent years, or claw-backs for gains later recognized in other states (Minn. Stat. 290.01 Subd. 19). That being said, there are some interesting Minnesota statutes that relate to 1031 exchanges.
Minn. Stat. 289A.12 Subd. 16
Minn. Stat. 289A.12 Subd. 16. is a tax reporting statute that is aimed directly at qualified intermediaries. It states that the commissioner may by notice and demand require a qualified intermediary to file a return relating to transactions for which the intermediary acted to facilitate exchanges under section 1031 of the Internal Revenue Code. The return must include the name, address, and state or federal tax identification number or Social Security number of each of the parties to the exchange, information relating to the property subject to the exchange, and any other information required by the commissioner.
Minn. Stat. 272.115
Minn. Stat. 272.115 – Certificates of Real Estate Value (CRV) are required by the State of Minnesota when recording a document that transfers real property with a purchase price of over $3,000. Technically a CRV is submitted with the county auditor in the county in which the real property is located when the deed or other document is presented for recording. If a property is being acquired as part of a like-kind exchange under section 1031 of the Internal Revenue Code of 1986, as amended through December 31, 2006, that must be indicated on the CRV form.
Minnesota State Deed Tax
For Minnesota State Deed Tax requirements involving transfers to or from a qualified intermediary see this article. Deed transferring property to the buyer [probably meaning exchangor] from intermediary should be taxed based on the fee charged by the intermediary. While deed transferring property to the intermediary should be taxed based on the value of the real property being conveyed.
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