1031 Exchanges Made Simple

1031 exchanges of real estate can be complex, but we do our best to simplify the process whenever possible. In this article, we are going to strip the 1031 exchange down to its most basic elements for easy consumption.

Like-Kind

1031 exchanges are also commonly known as “like-kind” exchanges. That’s because all property involved in a 1031 exchange needs to be like-kind, as designated by the IRS. Thankfully, like-kind is pretty simple when it comes to real estate, as most real property is considered like-kind to most other real property.

Investment or Business Use

Another important thing to remember is that your 1031 exchange property needs to be held for the appropriate use. Specifically, your property needs to be held for investment, or use in your trade / business. Property held primarily for personal use does not qualify for 1031 treatment.

Boot

Boot is any non-like-kind property that the taxpayer receives during an exchange. Receiving boot will trigger taxavle gain. The best way to avoid boot is to hire a qualified intermediary for your exchange so they can insulate you from receiving any taxable boot.

1031 Exchange Professionals

Get started with your 1031 real estate exchange by contacting a qualified intermediary. At CPEC1031, our intermediaries have two decades of experience and can help you through every step of your exchange – from start to finish. No matter what type of property you’re selling, a like-kind exchange is a great tool for deferring your capital gains taxes and keeping your money working for you in a continued investment. Reach out to us today at our downtown Minneapolis office to chat with our team of intermediaries about your exchange.

• Start Your 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

How A Typical 1031 Exchange Works

We get a lot of questions about how 1031 exchanges work. In this article, we are going to explain the typical process for a standard 1031 exchange of real estate.

Relinquished Property Purchase Agreement

The 1031 exchange process begins when you complete your purchase agreement for your relinquished property. The purchase agreement should state that you intend to do a 1031 exchange.

Find a Closing Company

You then need to contact a title company to close the transaction, and be sure to inform them that your transaction is a 1031 exchange.

Notify Your Exchange Company

At this point you need to notify your exchange company or qualified intermediary of the closing date, so they can prepare all the necessary documentation.

Close on the Relinquished Property

Your qualified intermediary will contact your closing agent and work with them to set up the exchange properly. This will involve the preparation of numerous closing documents.

Identify Your Replacement Property

After you close on your relinquished property, you have the next 45 days to identify in writing your new replacement property.

Replacement Property Purchase/Sale Agreement 

Similar to your relinquished property transaction, you’ll need to enter into a purchase/sale agreement for your replacement property.

Select a Closing Company

Find a title company to close your replacement property transaction and be sure to inform them that you are doing a 1031 exchange.

Close on the Replacement Property

Work with your qualified intermediary to set up the replacement property closing as a 1031 exchange.

Report Your Exchange on Your Tax Return

Finally, you’ll want to make sure to report your 1031 exchange on your tax return using IRS Form 8824.

Minneapolis Qualified Intermediary

CPEC1031 works with taxpayers large and small who want to defer their capital gains taxes on the sale of real estate. Our qualified intermediaries have decades of experience performing like-kind exchanges and will help you through every step of the 1031 exchange process, including document preparation, and advisement on replacement property. Contact us today to see if you are a good candidate for a 1031 exchange of real property.

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

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved