Are 1031 Exchanges More Difficult After the New Tax Law Passed?

People have a lot of questions about 1031 exchanges as they relate to the new tax bill that was passed late last year and went into effect the first of this year. In this article, we are going to delve into whether 1031 exchanges are more difficult now that the new tax law has gone into effect.

Exchanging Real Estate

The new tax law preserved 1031 real estate exchanges, meaning they are still a viable option for investors. In that sense, like-kind exchanges of real estate are no more difficult now than they were before the passage of the new tax bill.

Personal Property Exchanges

1031 exchanges of personal property, however, are a different story. The new tax law that went into effect on January 1, 2018 excludes personal property outright from 1031 exchange treatment. So personal property exchanges are a lot more difficult since the new tax law went into effects – that is to say, impossible.

Intermediaries for 1031 Exchanges

If you are considering a like-kind exchange of real estate, your first step should be to contact a qualified intermediary who can get you started with the process. A 1031 intermediary acts as a sort of guide throughout the course of your exchange. They will advise you, prepare your necessary exchange documents, and answer all of your questions that arise. At CPEC1031, we have been helping investors of all sizes with their real estate exchanges for more than twenty years. Contact our Minnesota qualified intermediaries today to set up a time to chat about your 1031 real estate exchange.

• Start Your Exchange: If you have questions about 1031 exchanges and the new tax law, 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 of Sports Team Player Trades

The new tax law has had a lot of implications on 1031 exchanges.  In this article, we are going to discuss 1031 exchanges of sports team player contracts and the implications of the new tax law.

Player Trades

When a sports team trades a player, they are essentially selling the player’s contract, which is viewed as a business asset. In the past, many teams have sold these contracts under section 1031 of the Internal Revenue Code, which allowed them to defer capital gains taxes on such a sale so long as they reinvested any proceeds into like-kind property (i.e. another player’s contract). But the new tax law changes that.

New Tax Law

The new tax law that went into effect January, 2018 limits 1031 exchanges to real estate. Items of personal property, which historically had been allowed under section 1031, are now excluded from 1031 treatment. That means team player contracts would no longer be eligible for 1031 exchange, and any teams would have to recognize capital gains when trading players (and thus selling their contracts). The big question is whether this will discourage teams for trading as many players moving forward.

Qualified Intermediaries for 1031 Exchanges

If you are considering a 1031 exchange tax deferral, it’s in your best interest to speak with a qualified intermediary before beginning the exchange process. Qualified intermediaries are trained 1031 professionals who understand the inner workings of like-kind exchanges. They can help advise you throughout your exchange and prepare your required documents for closing. At CPEC1031, we have been helping taxpayers with their 1031 exchanges for over two decades. Contact us today at our downtown Minneapolis office to set up a time to chat with our intermediaries.

• Start Your Exchange: If you have questions about 1031 exchanges of sports team player contracts, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Real Estate Exchanges Survive in the New Tax Bill

Since its inception, we’ve been monitoring the new tax bill (The Tax Cuts and Jobs Act) and its potential impact on section 1031 of the Internal Revenue Code. Now that the bill has passed and been signed into law (and officially took effect January 1, 2018), we’d like to offer a brief summation of its effects. In this article, we’ll provide an update on 1031 exchanges now that the new tax bill has been signed into law.

1031 Exchanges & the Qualified Intermediary

The biggest takeaway is that the new bill has preserved the 1031 exchange of real property and the role of the qualified intermediary in facilitating like-kind exchanges.

This bill is the first major tax code overhaul since 1986. It reduces many tax rates and redefines many rules and accounting methods. Thankfully, the bill keeps the 1031 exchange provision for real property.

However, not all 1031 exchanges were preserved with the passage of this bill. The legislation eliminates 1031 exchanges of personal property (aircraft, artwork, gold coins, and the like). This poses many questions for personal property investors who may currently be in the process of conducting a personal property exchange of like-kind property. It’s a good idea to contact your 1031 exchange professional to answer any of your questions about your exchange.

Qualified Intermediaries in Minneapolis

A qualified intermediary is perhaps the most important person you can have on your 1031 exchange team. Hiring an intermediary will ensure that you are insulated from receiving any taxable proceeds during your exchange. Furthermore, your intermediary will act as your advisor throughout the exchange – answering your questions, preparing your documents for closing, and more. At CPEC1031, we have decades of experience acting as qualified intermediaries for clients in Minnesota and throughout the country. Contact us today to speak with a QI about your like-kind exchange!

• Start Your Exchange: If you have questions about 1031 exchanges and the new tax bill, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Potential Ramifications if Congress Repeals the 1031 Exchange

When it comes to tax reform there are a lot of questions. What will the ramifications of a potential elimination of the 1031 exchange be?

Tax Reform

One thing I can tell you is if we have tax reform we're still going to have taxes, we just may not have a mechanism to defer those taxes through the wonderful vehicle of section 1031.

Some taxpayers are worried that if they start at 1031 exchange and then Congress changes the game on them midstream before they receive the replacement property that they could somehow be stuck in limbo with the provisions of 1031 being terminated before they've completed their exchange. That would, in effect, require them to recognize the gain on their now failed exchange because the provisions have ended.

Contact Your Legislator

Often times Congress will sunset a provision at a certain date in the future. The problem is if you haven't completed your exchange by that date you may be out of the benefits of a 1031 exchange. All of these questions highlight the importance of contacting your legislators and letting them know that eliminating 1031 will cause chaos and stagnation that we as taxpayers do not want to have happen. We want economic certainty and prosperity, and preserving 1031 is the best way to do that.

• Start Your Exchange: If you have questions about the potential repeal of section 1031, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved

Tax Reform & The Importance of the 1031 Exchange

There are a lot of rumblings out there about potential tax reform. President Trump has talked openly about how he wants to lower federal corporate income tax rates from 35% perhaps down to as low as 20%. How do we pay for this reduction in tax and the simplification of the tax code?

1031 on the Chopping Block?

Some pundits have speculated that section 1031 could be a victim of federal tax reform, thinking that Congress will throw it out in an attempt to simplify the code and to create some revenue raisers to offset these reductions in other areas. But throwing out section 1031 would likely have the opposite effect.

Market Stagnation

Let’s start with the assumption that 1031 elimination would result in more tax revenue collection. The result of eliminating 1031 would be stagnation and decreased velocity in the marketplace. I don't care if you lower rates down to 5%, a lot of our clients are just adamant that they don't want to pay any taxes on the sale of their real estate. They do not want to give away their hard-earned equity, and they will stay locked into their current properties and never sell them if they are going to get slapped on the wrist with this disincentive called taxes.

Without 1031 there is no tool to allow people to move their capital to the most advantageous investment. That stimulates property values, job growth, and has an unusual effective of benefiting the entire economy because capital is moving to different geographic areas around the country and into different business segments where it's needed.

• Start Your Exchange: If you have questions about 1031 and tax reform, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved