Many people who are considering a 1031 exchange want to know if it’s a good idea for their particular situation. In this article, we are going to discuss how to determine whether or not you are a good candidate for a 1031 exchange of real estate.
Like-Kind Exchanges
A like-kind exchange is a tax-deferral tool set forth in the Internal Revenue Code that allows taxpayers to defer their capital gains taxes when selling real estate as long as they hit certain benchmarks. When done correctly, a 1031 exchange allows you to avoid a big tax hit and keep that money working for you in a continued real estate investment – compounding your wealth over time.
Determining 1031 Exchange Eligibility
Here are some of the factors to consider to determine whether your property is eligible for 1031 exchange treatment:
Qualifying Purpose. First and foremost, you need to hold your property for the right qualifying purpose. Specifically, your property needs to be held for use in your trade or business, or for investment purposes. Property held for personal use is not eligible for 1031 exchange.
Like-Kind Property. Your replacement property also needs to be like-kind to your relinquished property to be considered for 1031 exchange.
Equity, Value, Debt. To defer all of your gains, you also need to go up in value, equity, and debt on your replacement property.
1031 Exchanges of Real Estate
The qualified intermediaries at CPEC1031, LLC work with clients in many industries on their 1031 exchanges of real estate. We have twenty years of experience guiding patients through their 1031 exchange transactions. Our qualified intermediaries can prepare your 1031 documents, advise you on the details of your transaction, and answer any questions you might have. Reach out to us today at our downtown Minneapolis office to set up an appointment with one of our 1031 intermediaries and get started with your transaction.
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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