How 1031 Exchanges Help the Economy During COVID-19

Section 1031 of the Internal Revenue Code is available to all US taxpayers and can be a crucial tool to help individual businesses and the national economy during the ongoing COVID-19 pandemic. Here are a few ways in which 1031 exchanges are economically beneficial in the midst of a pandemic.

• Section 1031 incentivizes businesses to diversify, consolidate, move into more productive property, or relocate to a different location.

• 1031 exchanges allow small business owners to move into more efficient facilities that meet their needs, rather than being stuck with an inefficient property.

• Like-kind exchanges are often used in conservation easements to reduce erosion, improve water quality, and sustain wildlife and wetlands.

• Farmers utilize 1031 exchanges to improve their operations, consolidate, or relocate while keeping their cash flow intact.

• 1031 exchanges improve communities by encouraging investment for the best use of real estate, and in the process, increase state and local tax bases.

• Like-kind exchanges can aid in the repurposing of office and retail spaces, allowing efficient flow of capital to where it’s most needed.

• 1031 exchanges create jobs and taxable revenue for adjacent industries such as realtors, title insurers, escrow agents, lenders, surveyors, contractors, inspectors, attorneys, and more.

1031 Exchange Professionals

At CPEC1031, we help clients throughout the United States defer capital gains taxes through the use of the 1031 exchange. We have over twenty years of experience in the 1031 exchange industry and can help you through your exchange – no matter how complex. Contact us today to learn more about the extent of our services or to get started with your next 1031 exchange of real estate. You can reach us at our primary offices located in downtown Minneapolis or at one of our satellite 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

Should I Start a 1031 Exchange During the COVID-19 Pandemic?

The ongoing coronavirus pandemic has a lot of real estate investors confused and frustrated – and rightly so. This is certainly the case among those considering 1031 exchanges right now. In this article, we are going to discuss whether or not you should consider starting a 1031 exchange during the COVID-19 pandemic.

Finding the Right Time

Timing is important in any real estate deal. Many taxpayers are hesitant to begin a 1031 exchange right now due to the uncertainty in the air at the moment. But this doesn’t mean you should completely avoid beginning your exchange. It’s possible that you may be able to find some great deals on replacement property right now because others are choosing to delay their exchanges.

Talk to a Qualified Intermediary

Ultimately, the best thing you can do is talk with a qualified intermediary about your specific situation to see if now is the best time to begin your 1031 exchange. An intermediary will be able to examine your unique situation and offer guidance on how to proceed.

Qualified Intermediaries in Minnesota

At CPEC1031, we facilitate 1031 exchange transactions in Minnesota and across the country. Our qualified intermediaries have over twenty years of experience with all types of exchanges. We can put that experience to work on your exchange and answer all of your questions during the process. Give us a call today to discuss the details of your next exchange and how we can help save you money in capital gains taxes. You can find us at our main office in Minneapolis or at one of our satellite offices around 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

How the 1031 Exchange Deadline Extension Impacts Taxpayers

Late last week, the IRS issued guidance in response to COVID-19 that potentially extends the 1031 exchange deadlines for taxpayers. This unprecedented guidance has resulted in a lot of additional questions and confusion. In this article, we wanted to highlight a complex 1031 exchange situation that resulted from this ruling.

Properties No Longer Available

One of our clients submitted their identified properties on March 23, 2019. Now, two of the properties are no longer available due to the coronavirus pandemic. What are the implications of the new deadline changes?

This is a really pertinent question because people that started their exchanges whose identification period ended before April 1 are extremely disadvantaged because many sellers of properties that were identified have pulled their property off the market because they can't show them during the Covid pandemic because their tenants won't let people into the units. Furthermore, they're afraid to sell their properties in down markets so they're pulling them off the market.

IRS Notice 2020-23 appears to only postpone any 45-day or 180-day deadline that occurs between April 1 and July 15, to July 15, 2020.

If your replacement property identification period ended prior to April 1, then there is no change or extension to the identification period; however the 180-day exchange period could be extended if your exchange period would normally end after April 1 and before July 15.

This is still a fluid situation and more information and details may be released by the IRS. We are continuing to monitor the situation.

• 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

Breaking: IRS Extends 1031 Exchange Deadlines

In response to the ongoing COVID-19 pandemic, yesterday, the IRS published Notice 2020-23, which appears to extend important 1031 exchange deadlines.

According to the Notice, if an exchangor's 45-day identification period or 180-day exchange period ends between April 1 and July 15, 2020, then their deadline may be extended until July 15, 2020.

This unusual response from the IRS may be welcome news for taxpayers conducting 1031 exchanges. However, there are a few things that the Notice leaves unclear, such as:

• Whether this relief applies only to 1031 exchangors who still have their exchange proceeds with a qualified intermediary. If an exchangor has already received their proceeds from the intermediary, do they have the option of continuing their exchange now that the deadlines have been extended? For example, if an exchange started on October 5, 2019, and the standard 180-day exchange period ended on April 2, 2020, and the intermediary has returned unused funds to the exchangor, can the exchangor nevertheless continue the exchange under the extended time frames until July 15, 2020, notwithstanding that they've received their funds back?

• Whether this extension is elective or automatic. Does this automatically extend all 1031 exchange deadlines to July 15? What if a taxpayer doesn't wish to extend their deadline that far? Do they have a choice? For example, if an exchangor identified a hotel as their replacement property, which is now unoccupied and undesirable as a purchase because of the coronavirus, and the exchangor has elected not to purchase this replacement property, are they now required to wait until July 15 to get their unused funds back from an exchange that they've decided to forego?

• What does this mean for taxpayers starting new exchanges? For people starting new exchanges on or after April 9, 2020 (when the IRS Notice 2020-23 was released), the extension may push back the date on which their replacement property identification deadline is due. For example, if you close on your relinquished property on April 10, typically, your 45-day identification period ends at midnight on May 25, 2020. Still, with the new extension, July 15 appears to be the new deadline for identification.

We are actively investigating these and other issues so that we can understand how to guide our clients through their 1031 exchanges. As always, I am available to start the conversation at 612.643.1031. I thank you and look forward to continuing the exchange.

• 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

COVID-19 Resources for 1031 Exchanges

The COVID-19 pandemic is sowing confusion in every industry – including real estate. In this article, we are going to offer up some 1031 exchange resources for taxpayers who have questions about 1031 exchanges during this challenging time. Stay tuned to this site for any future updates re: COVID-19 and 1031 exchanges.

45 / 180 Day Calculator

This free online calculator will help you calculate your 1031 exchange deadlines. Remember that you only have 180 days to complete your exchange once you begin (with the first 45 days set aside as your replacement property identification period). It’s possible that these deadlines may be moved due to COVID-19, but we have not received official word from the federal government on that yet.

1031 Glossary

Brush up on your like-kind exchange lingo with our 1031 exchange glossary of terms!

Educational Videos

Want to learn more about 1031 exchanges but don’t want to read? Check out our series of educational videos in which Jeff Peterson answers frequently asked questions on the topic of 1031 exchanges.

Start a 1031 Exchange Today!

Start your 1031 exchange today by contacting a qualified intermediary to get the process rolling. At CPEC1031, our qualified intermediaries have over two decades of experience facilitating exchanges of real estate throughout the United States. We can prepare your documentation for closing, advise you on replacement property, and answer all of your questions along the way. Contact us today at our Minneapolis office or one of our satellite offices around the country to start the process! We’re here to help in any way we can.

• 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved