There’s a lot to keep track of when conducting a 1031 exchange. In this article, we are going to take a look at a few 1031 exchange red flags that should raise your eyebrow.
Red Flag – An Unqualified or Disqualified Intermediary
Working with a qualified intermediary is the best way to ensure the success of your 1031 exchange. However, choosing the right intermediary can be a difficult task. Some intermediaries are not particularly qualified – they may be inexperienced or lack the required skills for the task. On a similar note, there are some people who are outright disqualified from acting as your intermediary, such as your attorney, accountant, or employee.
Red Flag – Property Flipping
1031 exchange property must be held for investment or business purposes. Property flippers are not eligible to conduct 1031 exchanges on such property. Typically, 1031 exchange property must be held for a minimum of two years before selling again.
Red Flag – Not Trading Up on Your Replacement Property
When conducting a 1031 exchange, your replacement property needs to be greater in value, equity, and debt compared to your relinquished property. If you don’t trade up on your replacement property, you may not be able to defer 100% of your capital gains.
CPEC1031
If you’re interested in saving money in capital gains taxes when you sell real estate, a 1031 exchange is the tool you need! At CPEC1031, it’s our business to help investors defer their capital gains taxes through the use of the 1031 exchange. Over the course of our twenty years in business, we have helped countless taxpayers defer their gains under section 1031 of the Internal Revenue Code. We can help you too. Contact us today at our offices in downtown Minneapolis to learn more!
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.
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