Property value is an important element to consider in a 1031 exchange of real estate. In this article, we’re going to talk about why it’s important to exchange into replacement properties that are equal to or greater than your relinquished property in value.
Rules Regarding Value
When conducting a 1031 exchange of real estate, there are many important rules to keep in mind. There are rules governing timing, the type of property that’s allowed, and more. One of the most often overlooked rules (but nonetheless important) is the rule governing property value. You need to make sure that your replacement property is greater in value compared to your replacement property. The same goes for debt and equity. This is known as the “napkin test” – and it’s a great preliminary test for determining your eligibility for a 1031 exchange of real estate.
Minnesota Real Estate Exchanges
1031 exchanges offer a fantastic alternative to paying capital gains taxes on the sale of real property. When used correctly, a like-kind exchange can help you defer these taxes and keep your money working for you in a continued investment – compounding wealth over time. At CPEC1031, our qualified intermediaries have twenty years of experience facilitating exchanges of real estate. Give us a call today at our downtown Minneapolis office to speak with one of our qualified intermediaries about your exchange and get started with the 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.
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