When conducting a 1031 exchange, most taxpayers want to do everything possible to get the most out of the transaction. But there are several potential pitfalls that can lead to a less than ideal 1031 exchange. In this article, we offer up a few tips for getting the most out of your 1031 exchange of real estate.
Think About Your Debt, Value & Equity
In most 1031 exchanges of real estate, taxpayers are hoping to defer 100% of their capital gains tax burden. However, in order to defer 100% of your taxable gain, you need to meet certain thresholds. Specifically, you need to make sure your replacement property is equal to or greater than your relinquished property when it comes to value, equity, and debt. If you fail to meet these benchmarks you may still be able to do a partial 1031 exchange, but it won’t be 100% tax-deferred.
Consider a Build-to-Suit Exchange
You can also consider a build-to-suit exchange if you want to add any construction improvements to your replacement property before completing the transaction. But keep in mind that any improvements you make to the replacement property must be completed within the 180 day exchange timeframe.
Take the First Step Towards Capital Gains Tax Deferral
Take the first step towards capital gains tax deferral today by reaching out to a qualified intermediary at CPEC1031, LLC to discuss your 1031 exchange. Our intermediaries have decades of experience under their belts. We can assist you through all the steps in a 1031 exchange and help you avoid any potential entanglements. Contact us today at our Minneapolis office to learn more about us, the 1031 exchange process, and how you can save money in capital gains taxes by conducting a like-kind exchange of qualifying real estate.
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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