If you go back and look at the legislative intent around the time of the first iteration of section 1031, one of the purposes was to not penalize people when they’re continuing their investment instead of cashing out. For example, let’s say there’s a farmer named Jim who had to sell his original farm because of some disruption and continue his investment in another location just down the road. One of the purposes of section 1031 is to not penalize Jim for continuing his investment in a new property.
You are considered to be “cashing out” if you are the puppet master and have constructive receipt of the funds or actual holding of the money. When that occurs, you have received taxable “boot” that cannot be included in a 1031 exchange.
In a modern day 1031 exchange you typically hire a qualified intermediary under one of the safe harbors of facilitating exchanges to hold your proceeds. You’re basically paying the intermediary to insulate you from having actual or constructive receipt of your funds.
Contact CPEC1031 for All Your 1031 Exchange Needs
If you are interested in the tax-saving benefits of like-kind exchanges, contact CPEC1031 for all your 1031 exchange needs! The qualified intermediaries on our team have decades of experience and can help you determine if a like-kind exchange is the right course of action. Defer your capital gains taxes and maximize your gain with a 1031 exchange of real estate. Reach out to CPEC1031, LLC to learn more about the like-kind exchange process, its benefits, and whether you are a good candidate for a 1031 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.
© 2024 Copyright Jeffrey R. Peterson All Rights Reserved