1031 Exchanges - Does Minnesota Comport with the Federal Standard?

In the state of Minnesota, we're very fortunate in that the state pretty much conforms exactly with the federal standard. So if you defer your gain for federal tax purposes you also defer your gain at the state level.

Other States

Other states differ from the federal standard. For example, Pennsylvania does not recognize non-simultaneous 1031 exchanges. And if you do a sale of property in Pennsylvania, though you may defer the gain at the federal level you do not get the same deferral at the state level.

The thing about states is that they can differ from the federal standard and they can be more aggressive than the feds in searching out to make sure that they get paid the amount of tax that they're due.

California 1031 Exchanges

In California for example if you sell a relinquished property there, each year after you have to file a tax return with the state of California to let them know if you’ve subsequently sold your replacement property, because when and if you ever do recognize the gain on the sale of your replacement property they want to collect their state tax at that time when you finally do recognize the gain. If you have questions about state taxation give us a call so that we can talk through the specifics of your situation.

1031 Qualified Intermediaries

For any other questions regarding the 1031 exchange process, contact the qualified intermediaries at CPEC1031, LLC. With twenty years of experience, we can confidently walk you through the 1031 exchange process and answer all of your questions. Contact us today to learn more about our services. Our main office is located in downtown Minneapolis, but we provide services to 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.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

Does Minnesota Have Any Special Reporting Requirements for 1031 Exchanges?

Minnesota generally conforms to the federal internal revenue rules for 1031 real property exchanges. There is not any special withholding, follow-up tax reporting in subsequent years, or claw-backs for gains later recognized in other states (Minn. Stat. 290.01 Subd. 19). That being said, there are some interesting Minnesota statutes that relate to 1031 exchanges.

Minn. Stat. 289A.12 Subd. 16

Minn. Stat. 289A.12 Subd. 16. is a tax reporting statute that is aimed directly at qualified intermediaries. It states that the commissioner may by notice and demand require a qualified intermediary to file a return relating to transactions for which the intermediary acted to facilitate exchanges under section 1031 of the Internal Revenue Code. The return must include the name, address, and state or federal tax identification number or Social Security number of each of the parties to the exchange, information relating to the property subject to the exchange, and any other information required by the commissioner. 

Minn. Stat. 272.115

Minn. Stat. 272.115 – Certificates of Real Estate Value (CRV) are required by the State of Minnesota when recording a document that transfers real property with a purchase price of over $3,000. Technically a CRV is submitted with the county auditor in the county in which the real property is located when the deed or other document is presented for recording. If a property is being acquired as part of a like-kind exchange under section 1031 of the Internal Revenue Code of 1986, as amended through December 31, 2006, that must be indicated on the CRV form.

Minnesota State Deed Tax

For Minnesota State Deed Tax requirements involving transfers to or from a qualified intermediary see this article. Deed transferring property to the buyer [probably meaning exchangor] from intermediary should be taxed based on the fee charged by the intermediary. While deed transferring property to the intermediary should be taxed based on the value of the real property being conveyed.

• 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