1031 Replacement Property Considerations from an Accounting Perspective

In a previous article, we talked about how you are not required to purchase all the replacement properties you identify. That being said, there are some accounting considerations you need to take into account when determining which properties to identify and purchase.

Purchasing Replacement Properties

From an accounting perspective you may want to purchase replacement properties that in total are of equal of greater value (and equity) than the property that you relinquished, but that is not really an identification requirement, some much as a general concept for calculating the extent of tax deferral/recognition by continuing your investment. This is because there can be both deferred and recognized gain in the same transaction when a taxpayer exchanges and receives replacement property of lesser value.

Only those properties that are properly designated or identified will be considered “Like-Kind” for purposes of Section 1031.

An exchange can include like-kind property exclusively, or it may also include like-kind property along with cash, liabilities and other property that are not like-kind. If you receive cash, relief from debt, or other property that is not like-kind, than you may trigger some recognition or taxable gain in the year of the exchange. It is important to work with your CPA or tax advisor to make sure you are completing your exchange correctly.

1031 Exchanges – a Win-Win Scenario

For many taxpayers selling investment property, a 1031 exchange is the most tax-advantageous method for selling property. When constructed correctly, a like-kind exchange will allow you to defer all of your capital gains taxes – which would have otherwise gone to the government – and instead reinvest those proceeds into a new replacement property. This results in a win-win for both the taxpayer and the economy as a whole. At CPEC1031, we have decades of experience facilitating exchanges and can help you put together a like-kind exchange to fit your needs. Contact us today to learn more!

• 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 Exchange Tips for Accountants

Many accountants and CPAs work with clients who are interested in 1031 exchanges. In this article, we are going to offer up a few 1031 exchange tips for accountants to help their clients when considering like-kind exchanges.

The Complexities of a 1031 Exchange

Most accountants and CPAs are not experts in the realm of 1031 exchanges. Like-kind exchanges, though they may seem simple, can be incredibly complex as there are a litany of rules and regulations you need to abide by. Many CPAs have a basic understanding of how 1031 exchanges work and can explain the benefits to their clients, but they can’t execute a 1031 exchange on behalf of their clients. That’s where a qualified intermediary becomes invaluable.

Partner with a Qualified Intermediary

If you are an accountant or CPA and your client is asking about doing a 1031 exchange, it’s important to refer them to a qualified intermediary who understands the ins and outs of the 1031 exchange process. We partner with many accountants and CPAs to offer 1031 exchange help to their clients as needed.

CPEC1031 in Minneapolis

At CPEC1031, our like-kind exchange professionals make it a point to give every 1031 exchange the attention it deserves. No matter what type of property you’re looking to exchange, we can advise you throughout the process so you feel comfortable and informed. Give us a call today to learn more about the like-kind exchange process and to get your exchange up and running. Our main office is located in downtown Minneapolis, but we work with clients throughout 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

Accounting Tips for a 1031 Exchange

There are many rules to keep in mind when it comes to 1031 exchanges of real property. In this article, we are going to offer up a few accounting tips to keep in mind for your next 1031 exchange of real estate.

3 Baseline Requirements

In terms of accounting, there are three baseline requirements you must satisfy in your 1031 exchange:

• Value. Your replacement property needs to be of equal or greater value compared to your relinquished property in order to cover all of your gain.

• Equity. All of your sales proceeds (equity) from the sale of your relinquished property need to be reinvested into your replacement property.

• Debt. You need to offset any debt relief with new debt to make sure that evens out. You can also invest additional cash to offset debt relief.

It’s also important to avoid seller-backed financing in a 1031 exchange. Such financing can trigger boot – which will be subject to capital gains tax. A qualified intermediary can help you navigate all of these rules and insulate you from receiving any gains or boot.

Exchanging into 1031 Property

At CPEC1031, we have over two decades of experience helping individuals exchange their property in 1031 transactions. We can walk you through all the steps in your exchange – from the sale of your relinquished property to the acquisition of your replacement property. Give us a call today to speak with one of our 1031 exchange intermediaries and get your like-kind exchange in the works! Our primary office is located in downtown Minneapolis, but we have offices around the 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved