In 1031 exchange transactions, some taxpayers have difficulty selecting appropriate replacement property. In this article, we are going to chat about some of your options for choosing replacement property in a 1031 exchange.
Like-Kind Real Estate
When it comes to replacement property, there’s one big category to which you need to adhere and that’s like-kind property. All real estate involved in a 1031 exchange has to be like-kind. Luckily, the definition of like-kind is quite broad. Most investment real estate is considered like-kind property so you have a wide range of options when picking your replacement property. As long as your property is like-kind, you can exchange into different industries or geographic locations. For example, you could sell a duplex in Minneapolis, and purchase farmland in Wisconsin.
Don’t Forget About Your Other Benchmarks
Like-kind isn’t the only consideration you need to take into account when selecting replacement property. Remember that you want your replacement property to be greater than or equal to your relinquished property in value, equity, and debt in order to defer 100% of your gains and get the full benefit of your 1031 exchange.
Tax Deferral is the Name of the Game
When it comes to selling investment real estate and keeping your money compounding over time, tax deferral via 1031 exchange is the name of the game! Section 1031 of the Internal Revenue Code exists to incentivize continue investment and help grow the economy. The best news is that any US taxpayer can conduct a 1031 exchange, so long as their real estate qualifies for 1031 exchange treatment. To learn more about the various rules and requirements of section 1031, reach out to a qualified intermediary at CPEC1031, LLC today to set up an appointment.
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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