How to Define ‘Like-Kind’ in a 1031 Exchange

Like-kind is one of the most important rules you need to follow when conducting a 1031 exchange of real property. All property involved in your exchange needs to be like-kind. But like-kind can be a tricky thing to nail down in certain exchanges. In this article, we will explain the intricacies of “like-kind” in a 1031 exchange of real estate.

Real Estate Exchanges

When it comes to 1031 exchanges of real property, the IRS has defined “like-kind” very broadly. In general, most real estate is considered like-kind to most other real estate. It doesn’t matter where they are located (so long as they’re in the US), or their respective industries. You can exchange out of an apartment building and into a hotel building, for example.

When in doubt, it’s always a good idea to consult with a qualified intermediary about the details of your exchange and whether your property qualifies as like-kind or not.

Minneapolis 1031 Exchange Company

The qualified intermediaries at CPEC1031, LLC have decades of experience helping taxpayers in the Twin Cities, greater Minnesota, and across the country with their like-kind exchanges of real property. Contact us today at our downtown Minneapolis office to set up a time to chat with one of our skilled 1031 exchange accommodators.

• 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.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

How “Constructive Receipt” is Defined in a 1031 Exchange

Constructive receipt is an essential term to understand when engaging in a 1031 exchange of like-kind property. In this article, we are going to define constructive receipt and how it comes into play in a 1031 exchange transaction.

What Exactly is “Constructive Receipt”?

Constructive receipt is an important term to be aware of in a 1031 exchange. In particular, it is something you want to avoid at all costs if you want to defer 100% of your capital gains taxes.

1031 exchanges allow you to defer taxes on the sales proceeds of a real estate transaction. However, the catch is that you need to reinvest all of those net proceeds into a new replacement property in order to effectively defer the gains. This incentivizes investors to continue investing and has the added benefit of stimulating the economy. That being said, you are not allowed at any time during the 1031 exchange process to receive any of the sales proceeds. These need to remain in a segregated account until it comes time to reinvest them into your new property. Should you actually receive any of these proceeds during the process – that is known as “constructive receipt” and will trigger taxable boot.

CPEC1031

In any 1031 exchange you want to make sure you are working with a qualified intermediary you can trust. At CPEC1031, our intermediaries have two decades of experience working on 1031 exchanges. We know the process inside and out – and will put our expertise to work for your transaction. Our intermediaries can draft your 1031 documents and answer all of your questions about the process. Reach out to us today at our downtown Minneapolis office to set up a time to chat with one of our experienced 1031 exchange intermediaries.

• 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

Maximizing The Impact of Your 1031 Exchange

Without the right resources at hand, a 1031 exchange can go horribly wrong. In this article, we are going to discuss a few tips for maximizing the impact of your 1031 exchange.

Work with a Qualified Intermediary

Working with a skilled and experienced qualified intermediary on your exchange is the best way to maximize its impact and ensure its success. An intermediary is a pro on all things related to section 1031 and will be able to advise you on the right steps to take as you progress.

Line up Your Replacement Property

Once you start your 1031 exchange, you only have 180 days to complete it. And you only have 45 days to identify your replacement property. This can lead to a huge time crunch for taxpayers who sell their relinquished property before lining up replacement property. While you don’t need to have your replacement property completely locked down before you begin the process, it’s a good practice to at least do some preliminary research so you are well prepared.

Like-Kind Exchanges Under Section 1031 of the IRC

1031 exchanges apply to every United States taxpayer who owns qualifying property. See how a 1031 exchange can benefit you by contacting a qualified intermediary at CPEC1031. Reach out to our 1031 exchange professionals today to learn more about the process and how we can help you save money in capital gains taxes. Our primary office is located in the heart of downtown Minneapolis. You can also find us 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.

© 2019 Copyright Jeffrey R. Peterson All Rights Reserved

To Exchange, or Not to Exchange - A 1031 Case Study

Here’s an interesting 1031 exchange case we recently assisted a client with. The client was selling a Jiffy Lube in St. Paul and was wondering whether or not to do a 1031 exchange on the property. The seller was concerned about feeling pressured into a less-than-ideal acquisition if they couldn’t find a replacement property that fit their desires.

This is a common dilemma that many face when considering a 1031 exchange. Should you set up the exchange, and if you can’t find a quality replacement property, break the exchange, pay the taxes, and only be worse off the reasonable costs incurred to have set up the exchange?

 Keep Your Options on the Table

I would set up the 1031 exchange to keep all of the options (for tax deferral) on the table for as long as possible. You don’t have identify any replacement properties if you don’t see any good deals within the 45 day identification period; and if you do identify, you don’t have to purchase any of the identified replacement properties during the remaining 135 days (of the 180-day exchange period), if your due diligence results are not favorable. Yes you can fail, but if you don't try you will never know if you could both defer the tax and receive a truly quality replacement property to complete your 1031 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.

© 2019 Copyright Jeffrey R. Peterson All Rights Reserved

Is a 1031 Exchange Worth the Trouble?

Many people are aware of the benefits of a 1031 exchange, but might not want to go through the hassle of setting up an exchange – thinking that they’d rather just sell their property, pay their capital gains taxes, and be done with it. But a 1031 exchange really isn’t as much of a hassle as many people think. In this article, we are going to explain why a 1031 exchange of real estate is worth any associated “trouble.”

The Benefits of a 1031 Real Estate Exchange

A 1031 exchange allows you to defer your capital gains taxes when selling real estate as long as you move those net proceeds into a like-kind investment property.

That’s a significant amount of money you can save by conducting a 1031 exchange. In a typical sale, that money would be gone – out of your hands after the sale. But a 1031 exchange allows you to hold onto that capital gains tax money and reinvest it in a like-kind property. The benefit to you is that your money continues to compound and build over time. You can even continue deferring those taxes over time by arranging 1031 exchanges every time you wish to see your property.

1031 Intermediary Services

A qualified intermediary can advise you on your exchange, answer any lingering questions you might have, and prepare your 1031 exchange documents so you are ready for closing. The qualified intermediaries at Commercial Partners Exchange Company have two decades of experience facilitating exchanges of real property. Contact us today to see if your property qualifies for a 1031 exchange and start saving money by deferring your capital gains taxes on your next real estate sale.

• 1031 Hotline: 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