What is the Last Step in the 1031 Exchange Process?

We’ve talked a lot about the 1031 exchange process as well as the first step you need to take to begin your exchange. But what about the end of your exchange? In this article, we are going to talk about the last step in the 1031 exchange process.

Closing on the Replacement Property

The big final step in a 1031 exchange is the closing on the replacement property. During this process, you will move your net proceeds from the relinquished property into your new replacement property and defer your capital gains taxes in the process. After the closing is complete, don’t forget that you will need to report your exchange on your tax filing.

Beyond Your Exchange

Once your exchange is complete and you’ve successfully deferred your capital gains taxes, you can rest easy in the knowledge that you sold your property in the most tax-advantageous method possible. But don’t forget that 1031 exchanges allow you to defer your tax – which means you will still need to pay capital gains taxes if and when you sell your replacement property in the future. However, you can also opt to exchange that property and continue your tax saving if you so choose.

Finish Your 1031 Exchange

Finish your 1031 exchange and defer your capital gains taxes when selling real estate. The qualified intermediaries at CPEC1031 can help! Our intermediaries have two decades of experience facilitating exchanges throughout the United States. We have the knowledge and experience needed to ensure your exchange goes as smoothly as possible. Contact our 1031 exchange professionals today to get your exchange up and running!

• 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

When NOT to Do a 1031 Exchange

We talk a lot about the tax-saving benefits of 1031 exchanges. But the reality is that 1031 exchanges are not right for every single situation. In some instances it just doesn't make sense to pay the associated 1031 exchange fees. The proceeds from your relinquished property generally need to hit a certain threshold to warrant the 1031 exchange fees.  

When NOT to Do a 1031 Exchange

If your state and federal tax liability (including deprecation recapture) on the sale are lower than $1,100, then you would not want to do a 1031.

Also if you sold the property and had a loss, rather than a gain, then you would not want to do a 1031 exchange.

Check with Your CPA

Best to check with your CPA before you set up the 1031 exchange to make sure you have enough profits to justify the costs involved. In most cases, the taxes far exceed the exchange fees; but you should have a clear dashboard from your CPA to know you are making the correct decision.

• 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

1031 Exchange Tips for Real Estate Closing Agents

If you work as a closer for real estate transactions and you're notified that one of the parties to the transaction wants to do a 1031 exchange, it’s important for you to make note of that right away in the file and find out who are the people that are helping facilitate this exchange. Here are a few tips for closing agents who encounter 1031 exchanges.

Eleventh Hour Fire Drills

We often get calls from closers at the eleventh hour saying that nobody made arrangements for the 1031 exchange. Everybody involved thought it was someone else's job to do, and now we need to hurry up and get 1031 documents prepared for a closing that's imminent. We can do that, but it's a real fire drill.

Questions to Ask

The better arrangement is to contact the party that intends to do a 1031. Ask them the following questions:

• Is this your relinquished property that you're selling?

• Have you started your process with a qualified intermediary?

How a Qualified Intermediary can Help

If they haven't started with a qualified intermediary, have them contact CPEC 1031 right away. We can get a copy of the purchase agreement and title work from you; we can gather the specific details in particular that we need from the seller; and we can put together the 1031 and the closing instructions that you'll need to know how to prepare the settlement statement and what notices need to be given to the other parties. This allows all of the documentation to be dealt with up front well before the closing occurs so that we have a smooth signing ceremony.

• Start Your Exchange: If you have questions about closing documents related to a 1031 exchange, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved