How a 1031 Exchange Can Benefit Anyone

Many people who are thinking about selling real estate want to know how exactly doing a 1031 exchange can be a beneficial course of action. In this article, we will explain how a 1031 exchange of real estate can benefit you.

Avoid a Big Tax Bill

When preparing to sell a piece of real estate, many investors hesitate when they realize just how much they are going to be liable for in capital gains taxes. This is where a like-kind exchange can benefit you. By 1031 exchanging your real property, you can avoid this big capital gains tax bill by deferring your gains.

Put Your Money to Work

By deferring your capital gains taxes and not having to write a big check to Uncle Sam, you are able to keep your money working for you in a continued investment. In a 1031 exchange, you don’t get to just pocket the net proceeds that would have otherwise have gone to the government in taxes. Rather, you need to move those proceeds into a continued like-kind investment. This allows you to compound and build your wealth over time by keeping your money working for you.

Defer Your Capital Gains Tax

A 1031 exchange is the best way to defer your capital gains taxes when you sell real estate. However, in order to defer all of your gains you have to meet certain benchmarks and follow specific rules. This can get complicated if you’ve never done it before. That’s why it’s important to hire a qualified intermediary as early as possible in the exchange process. Contact a 1031 exchange company today to see if your property qualifies for 1031 treatment.

• 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

After Starting a 1031 Exchange, Do You Have to Purchase the Replacement Properties?

One of the most common questions regarding 1031 exchanges is – what happens if you change your mind after starting the process? If you’ve already begun the 1031 exchange process, do you need to go through with it?

Options After Starting the Exchange

The short answer is no. By setting up the 1031 exchange with the qualified intermediary you are keeping your options open to potentially completing an exchange (and deferring the gains), but you are not obligated to buy any replacement properties. After the closing of the relinquished property, you will have 45 days to designate or identify in writing the potential replacement properties, and if you do not designate any properties, then the 1031 exchange will fail, and the unused exchange funds will be returned to you on the next business day.

If you do designate some potential properties, then you will continue to keep the your options open to potentially completing an exchange as to those designated properties that you listed for the remainder of the exchange period (180 days). Any remaining unused exchange funds will be returned to you on the next business day after the 180th day has elapsed.

Both the 45-day identification period and the 180-day exchange period run from that day after closing of the relinquished property.

•  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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

Best Practices for Allocation in a 1031 Exchange

In this article, we are going to discuss some best allocation practices when selling a business or real property in a 1031 exchange.

Best Allocation – Sale of Business / Real Property

The first place to start is to drill-down on the value (or price) allocated to the real property, the amount of remaining debt on the property and the current adjusted basis on the real property. If you can allocate to the non-real estate components a price that is close to the remaining basis in the good will and personal property, then you may be able to increase the tax efficiency and defer more of the gains on the overall sale.

It’s always a good idea to involve your CPA in the discussion as well to determine the best allocation strategy for your situation.

CPEC1031, LLC

At CPEC1031, we are dedicated to providing the best possible services to our clients. Over the course of our decades in the industry we have built up a reputation as the professionals in commercial transactions. Let us put our experience to work for you on your transaction. Contact us today to learn more about the services we provide and how we can help. Our main office is located in downtown Minneapolis, but we work with clients across the United States.

•  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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

Is it Possible to Partially Cash Out Your 1031 Exchange

With the current strength of the real estate market, many real estate investors face steep capital gains taxes when selling property. That makes 1031 exchanges very attractive as they allow a taxpayer to defer those capital gains taxes so long as you move all of your proceeds into a new property. But some taxpayers may want to pocket some of those net proceeds in addition to deferring their taxes. Is it possible to have the best of both worlds? In this article, we are going to talk about whether or not it’s beneficial to do a partial cash-out on your 1031 exchange.

Cash Boot

The short answer is, yes – it is possible to do a partial 1031 exchange and pocket some of the sales proceeds. But remember, any cash that you receive during the 1031 exchange process is considered boot and is subject to capital gains taxes. The amount of cash boot you receive and whether or not it will still be beneficial to conduct an exchange depends on your specific property and situation. It’s important to consult with your tax advisor before making a decision.

Real Estate Exchanges in MN

Real estate exchanges are great for individual taxpayers (because they allow you to defer capital gains taxes), as well as the economy as a whole. Any US taxpayer can avail themselves of the benefits of section 1031, so it’s always worth considering when you’re looking to sell real estate. With twenty years of experience, our team has the skills needed to accomplish the goals of your 1031 exchange. Contact our qualified intermediaries today to learn more about our services and to set up a time about your 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

3 Tips to Avoid Failure with your 1031 Exchange

There are a lot of things that can go wrong with a 1031 exchange of real estate if you’re not careful. If your exchange fails, you will not be able to defer your capital gains taxes on the sale, so it’s important to set yourself up for success as much as possible. In this article, we will offer some great tips for not letting your 1031 exchange fail.

Sign Before Your Close

Your 1031 exchange documents must be signed on or before the closing date for the sale of your relinquished property. After the sale of the relinquished property, it is too late to set up a like-kind exchange.

Be Careful with Your Expenses

Expenses can be tricky in the realm of 1031 exchanges. Some expenses can be paid with the net proceeds, while others cannot. Consult with an intermediary about these expenses before closing.

Same Taxpayer Requirement

Remember, the same taxpayer who sells the relinquished property must acquire the replacement property. A common example occurs with recently married couples. In a 1031 exchange, you can’t sell a property by yourself and then acquire a new property jointly with your spouse.

Contact a Qualified Intermediary

At CPEC1031, we have more than twenty years of experience working with clients on their like-kind property exchanges. Our intermediaries can help guide you through the 1031 exchange process, preparing your documentation, and answering your questions every step of the way. Let us help you through the ins and outs of your 1031 real estate exchange. Contact us today at our office in downtown Minneapolis to learn more about our services and get your 1031 exchange set up.

• 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved