How to Take the First Step in the 1031 Exchange Process

Diving into a 1031 exchange of real estate can be a daunting task – especially for those who have never done a 1031 before. But it’s actually a pretty straight-forward process. In this article, we are going to explain how to take that first step in starting the 1031 exchange process for your property.

First – Talk to a Qualified Intermediary

The first thing you need to do is find a qualified intermediary. 1031 intermediaries are well-versed in all aspects of section 1031 of the Internal Revenue Code. They will be able to advise you on the process, your best options, and facilitate the exchange for you. Involving a qualified intermediary early in the process is key to ensuring a smooth exchange. Before you begin the required paperwork of a 1031 exchange, your intermediary will have a discussion with you about the property you’re selling and whether or not you are a good candidate for 1031. Here are some of the questions they may ask during this initial phase:

• What is the nature of your relinquished property? Is it held for personal use, or investment purposes?

• What is the value / equity / debt on your property?

• How do you own the property? As an individual, or through a business entity?

• When do you intend to close on the property?

CPEC1031

At CPEC1031, we have more than two decades of experience helping investors of all sizes with their like-kind exchanges of real estate. We can put that experience to use on your exchange by helping guide you through the process and ensure that you have everything taken care of. Contact our intermediaries to chat about your exchange today. Our main office is located in downtown Minneapolis, but we serve the entire state of Minnesota, as well as the greater United States.

• 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

1031 Exchanges for Beginners

Anyone can do a 1031 exchange and avail themselves of the associated benefits of tax deferral. But many taxpayers are intimidated by the 1031 exchange process and assume it’s too complicated. In actuality, 1031 exchanges can be accomplished by following a few simple rules. In this article, we are going to talk about a few things that beginners should understand about 1031 exchanges.

Qualified, Like-Kind Property

Not all property is eligible for 1031 exchange treatment. The new tax law completely excludes personal property from 1031 exchange treatment. Real property also comes with several restrictions. First of all, your property needs to be held for a qualified purpose (i.e. for investment or business purposes). Furthermore, all property in the exchange needs to be like-kind.

Time Periods

You also have various time periods to keep in the back of your mind during a 1031 exchange. Your total time frame for completing the exchange is 180 days. The first 45 of those days is your identification period for identifying in writing your replacement property.

Qualified Intermediary

A qualified intermediary is a neutral third party whose job it is to facilitate your 1031 exchange. Working with an intermediary is the best way to ensure a successful exchange.

1031 Real Estate Exchange Services

At CPEC1031 our qualified intermediaries assist taxpayers in the exchange of real estate. A qualified intermediary can help you prepare all of the necessary 1031 exchange documents, advise you on your property, and answer all of your questions along the way. Reach out to us today to discuss the details of your real estate exchange. Our primary office is located in downtown Minneapolis but we work with clients all over 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

The 1031 Exchange Process Part 2: Identification & Replacement Property

Recently, we began a conversation about the 1031 exchange process. In this article, we are going to continue our discussion of the 1031 exchange process - from replacement property identification to completion.

Identification & Exchange Period Commence

You are now in the 45-day identification and 180-day exchange periods.  These time frames run concurrently.   Note that the 180-day period can be shortened to your deadline for the filing of your federal tax return, for the year in which the sale occurred.

Identify the Replacement Property

Before the end of the 45-day identification period, you must fax or send us a detailed list of the Replacement Property you intend to acquire. We prefer that you use the form we supplied you in our initial timeframe letter.  You must sign the identification form and clearly and unambiguously describe the Replacement Property.  We recommend that your letter be postmarked and sent by US Mail to prove that you sent us the identification during the 45-day period. If you plan on faxing in your identification, please fax to CPEC at (612) 395-5475.

Purchase/Sale Agreement for the Replacement Property

Enter into a purchase/sale agreement(s) and add a cooperation clause as you did in the first transaction. Please fax the replacement property purchase/sale agreement to CPEC at (612) 395-5475.

Select a Closing Company

Arrange for a title company or attorney to close your transaction.  Make sure you tell the closing agent that this transaction is going to be a 1031 exchange and that CPEC is serving as your Qualified Intermediary. Once you have your closing title company selected, please notify CPEC of your pending closing.

Replacement Property Closing

CPEC will contact the closing agent and obtain any additional information needed to set up the replacement closing for you.  We will prepare the 1031 replacement documents and send two sets of these documents directly to the closing agent. At closing, you will sign the replacement property exchange documents along with your other closing documents.  The closing agent should give you one set of the documents for you to keep for your tax records and send one set to CPEC, together with a copy of the closing statement and deed transferring title to you.

End of Exchange

When you have closed on the last identified property, or at the end of the 180-day exchange period, your exchange ends.  CPEC will return any unused proceeds to you.  In order to defer all gains, you should reinvest all of your proceeds in like-kind replacement property of equal or greater value and equity. Talk with your accountant or tax advisor to make sure this requirement is correctly satisfied.

Report The Exchange on Your Tax Return

 When you file your tax return for the year in which the relinquished property was transferred, you will need to attach IRS Form 8824 to report your exchange to the IRS.

• Start Your 1031 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