What Are Your Options If You Can’t Find a 1031 Replacement Property?

Any given 1031 exchange must be completed within 180 days of its initiation. This can pose problems for taxpayers, especially in a hot seller’s market. In this article, we are going to offer some tips and tricks for taxpayers who can’t find a suitable replacement property during their 1031 exchange.

2 Realms of Real Property

There are two realms in which you can search for your replacement property, which has to be real estate in the United States held for investment or business purposes.

1. The big realm is traditional brick and mortar real estate.

2. The other realm is the securitized realm, in which companies have products that are marketed and regulated as securities but nevertheless also constitute real estate for federal tax purposes.

Benefits of the Securitized Realm

This securitized realm is a great place to go when you can’t find suitable replacement property in traditional real estate. The added benefit of the securitized realm is that it’s much less management intensive compared to traditional real estate.

Right now, because the market is so hot, property owners in many cities are looking down the barrel at higher taxes, greater regulation, and more potential difficulties. Because of those potential headaches, many owners are deciding to sell their property at the top of the market and exchange into a Delaware Statutory Trust, for example, that offers management-free alternatives

Minnesota Qualified Intermediaries

At CPEC1031, LLC our team of qualified intermediaries has over two decades of experience working on 1031 exchanges of all kinds. We can help you understand your options in a hot seller’s market. Reach out to us today to learn more about our 1031 exchange services and see how we can help with your next 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

What to Remember When Reinvesting 1031 Exchange Proceeds

If you are in the process of selling four real estate investment properties, would a 1031 exchange work if you reinvested a portion in storage units as a business? The short answer is, yes - real property ownership of US storage units can qualify for 1031 exchanges, if they are held for investment / business purposes.

Real Property Exchanges

All U.S. real properties (brick/mortar and land) are generally like-kind, regardless of whether the properties are improved or unimproved. However, real property in the United States and real property located outside of the United States are not like-kind.

3 Rules of Thumb

There are three general rules of thumb to quickly see if you will defer ALL of the recognition of gain.

1. Typically you will acquire replacement property that is “up or equal” in Value* (price); {*net of sales commissions and customary transactional expenses}

2. You will roll over all of your Equity (net proceeds) from the relinquished property into your replacement property.

3. And to the extent that you were relieved of liabilities and Debt, such as mortgages on your old relinquished property, the debt relief is offset by (1) new liabilities or mortgages taken on in conjunction with your purchase of the replacement property; OR (2) by investing additional cash in the replacement property equal to the amount of liabilities and debts that were discharged.

You can have a partial tax deferral if you miss these general benchmarks.

• 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

Types of Real Property that can be 1031 Exchanged

Last year, the Tax Cuts & Jobs Act went into effect and significantly narrowed the types of property eligible for 1031 exchange. Specifically, this Act excluded personal property outright and left only real property eligible for 1031 treatment. Within the realm of real estate, the like-kind definition is quite broad. In this article, we are going to talk about the various types of real property that qualify for 1031 exchange treatment.

Like-Kind Real Property

When it comes to 1031 exchanges, the term “like-kind” property generally refers to the character or nature of the property – rather than its quality or grade. All real estate involved in an exchange must be held for investment or for productive use in a trade or business. Here are some examples of like-kind real estate that can be exchanged in a 1031 transaction:

• Real Property (both improved or unimproved)

• A Duplex for a Commercial Property

• An Apartment Building used for Single-Family Rentals

• Commercial Building

• Fee for a Leasehold Interest

• Rental Resort Property

Commercial Real Estate Exchanges

At CPEC1031, we work with investors of all sizes on their 1031 exchanges of real property. With twenty years of experience at our backs, we can walk you through the entire like-kind exchange process and keep you informed every step of the way. Contact us today to learn more about our 1031 exchange services and start saving money on your real estate transaction! You can find us at our office in downtown Minneapolis. We also work with clients throughout 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

Why Do a 1031 Exchange of Your Property?

Many people have heard of 1031 exchanges but aren’t sure why they should consider doing one. In this article, we’re going to talk about why it may be a good idea for you to 1031 exchange your property.

Tax Deferral

A 1031 exchange offers you a potentially huge tax deferral. In a typical 1031 exchange (assuming you meet all the requirements) you are able to defer all of your capital gains taxes on the sale of your property so long as you roll those sales proceeds into a replacement property of equal or greater value. This is a great way to avoid a potentially big tax bill.

Compounding Interest

Another benefit is that you get to keep your hard-earned money working for you. Instead of writing a check to the government for your capital gains taxes, you get to keep that money compounding and building in your replacement property. In a sense, your money keeps working for you over time, rather than going to a tax payment.

Minneapolis Qualified Intermediary Company

At CPEC1031, we help investors defer capital gains tax on the sale of real property under section 1031 of the Internal Revenue Code. We have over two decades of experience facilitating real estate exchanges of all shapes and sizes. If you are interested in learning more about the tax-deferral benefits of a 1031 exchange of real estate, contact us today at our downtown Minneapolis office and speak with one of our qualified intermediaries about your exchange.

• Start Your 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

What is a Delaware Statutory Trust?

A Delaware Statutory Trust (DST) is a new-fangled creature. Years ago, LLCs were the new kids on the block and not every state had an LLC statute. DSTs are kind of like the newest kids on the block. Here is a primer on Delaware Statutory Trusts as they relate to 1031 exchanges.

The Basics of a Delaware Statutory Trust

A Delaware Statutory Trust is a method of owning property where at the top of the ownership pyramid there is a trustee that is the figurehead owner of the property. That trustee can enter into institutional financing with creditors, and can enter into leases with occupants of the property. But for tax purposes the beneficial owners of the trust, the investors that put their money into the purchase of the DST, are not deemed to be owners of a trust, but instead are deemed to be owners of the assets (typically real property) of the trust.

DSTs and 1031 Exchanges

For 1031 exchange purposes you can sell a traditional fee interest in title and acquire a beneficial interest in a Delaware Statutory Trust and that interest will be treated as interest in the underlying real estate and as like-kind to the fee simple title sold in the relinquished property.

Some of the benefits of a Delaware Statutory Trust are that they may be designed to provide a steady income stream for the investors, typically the debt on a DST is institutional and non-recourse financing. So if a taxpayer has to acquire a property with debt on it, to satisfy any requirements under the napkin test for debt relief, at least they are taking-on non-recourse debt instead of debt for which they are personally liable for.

• Start Your 1031 Exchange: If you have questions about Delaware Statutory Trusts, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2016 Copyright Jeffrey R. Peterson All Rights Reserved