Property that Cannot Be Exchanged Under Section 1031

The Tax Cuts & Jobs Act that was passed late last year and went into effect in early 2018 made numerous changes to the rules governing section 1031 – particularly what can and cannot be exchanged in a 1031 transaction. In this article, we are going to talk about a few types of property that cannot be exchanged under Section 1031 of the Internal Revenue Code.

Non Like-Kind Property

All property involved in a 1031 exchange needs to be like-kind. That means any non like-kind property is not eligible. How do you determine like-kind? Thankfully, the definition is pretty broad when it comes to real estate. But make sure you are only exchanging property that is used for investment or business purposes.

Personal Property

The Tax Cuts & Jobs Act which went into effect earlier this year effectively restricted 1031 exchanges to real property. That means that many items of personal property that were once eligible for 1031 treatment, can no longer be exchanged in such transactions. Here are a few examples of personal property items that can no longer be exchanged:

• Aircraft

• Artwork

• Business Equipment

• Coins & Precious Metals

• Livestock

Is a 1031 Exchange Right for You?

Looking for help with you 1031 exchange of real estate? Our qualified intermediaries are ready and able to walk you through every step of the process – from selling your relinquished property to closing on your new replacement property. At CPEC1031 our intermediaries have over two decades of experience facilitating exchanges in Minnesota and across the country. Contact us today at our downtown Minneapolis office to set up an appointment with one of our intermediaries and see if a 1031 exchange is right for you!

•  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

1031 Exchanges: 200% Rule vs. 95% Rule

There are many ways you can go about doing a 1031 exchange, as well as many rules that govern the exchange of property under section 1031. In this article, we are going to discuss two of the most common options for exchanging property under section 1031 – the 200% exchange rule and the 95% exchange rule.

200% Rule

When using the 200% rule, you (as the exchangor) are allowed to identify as many replacement properties as you wish. But the total value of all replacement properties cannot exceed 200% of the relinquished property’s value.

95% Rule

The 95% rule is much less common than the 200% rule for exchanging 1031 property. If you’re using the 95% rule to defer gains, you are allowed to identify any amount of replacement properties so long as you receive at least 95% of the value of all your identified properties.

Choosing The Best Option

So what’s the best option for your 1031 exchange? That depends entirely on your situation. Every 1031 exchange is unique and should be treated as such. Are you exchanging real property or personal property? What types of replacement properties are you looking to exchange into? These are all questions that need to be carefully considered before deciding on a course of action.

Minnesota 1031 Exchange Company

At CPEC1031, our qualified intermediaries have decades of experience aiding taxpayers with their like-kind exchanges. Whether you’re exchanging real estate property, we can walk you through the process, prepare all the required documents, and answer all of your questions. Contact us today to speak with a Minnesota qualified intermediary about your exchange.

• Start Your Exchange: If you have questions about the 200% or 95% rules, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved