The Limitations of a 1031 Construction Exchange

A build-to-suit construction exchange is great because it allows you to construct improvements to your replacement property before exchanging into it. In this article, we are going to talk about the limits of a 1031 build-to-suit construction exchange.

Time Constraints

A build-to-suit construction exchange sounds incredible, but it is not free from restrictions. Just like any other 1031 exchange, a build-to-suit exchange needs to abide by the 180 day exchange period. That means you’ve only got 180 days total to complete your construction improvements and finish your exchange. Any improvements you want to make need to be finished within 180 days, so your options are limited by timing.

But don’t let that discourage you! While you may not be able to tear down and construct a whole new building, you likely have time to replace some flooring, put up some drywall, or construct other minor improvements that can add up. This is also a great way to get your replacement property closer to your ideal property.

Minnesota Like-Kind Exchange Company

A like-kind exchange is a great way to defer taxes when selling real estate, and a qualified intermediary is the best person to have on your team when starting an exchange. The CPEC1031 intermediaries have twenty years of experience on their side and can walk you through each stage of your exchange. Get started with your 1031 exchange by contacting one of our qualified intermediaries today at our downtown Minneapolis offices or one of our other offices around 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

Certificates of Occupancy & 1031 Improvement Exchanges

When you’re doing a 1031 exchange and constructing improvements on the new replacement property you may be in a hurry to get as much replacement property constructed and existing as like-kind property as possible so that when you receive the replacement property it’s of equal or greater value than the property that you relinquished.

A Potential Stumbling Block

One potential stumbling block that people are concerned about is:

• “What if I have to transfer the parked replacement property to the taxpayer before completion of all of the improvements and before a certificate of occupancy has been issued?”

From a 1031 exchange tax perspective we don’t care if a certificate of occupancy has been issued. What we care about is whether or not the like-kind real property improvements exist. What we need is to be able to deed or convey those parked property improvements to the taxpayer within the time frames of the exchange.

Certificates of Occupancy

It is of less concern from a tax perspective that we have a certificate of occupancy but sometimes it’s hard to get a deed recorded in certain jurisdictions if you don’t have the requisite certificate of occupancy. So you may be stuck with delivering an unrecorded deed to effectuate the transfer and that deed may or may not get recorded within the 180 day exchange period. But typically upon delivery of the deed you’ve got an effective convenience for tax purposes.

• 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

Information to Send your Qualified Intermediary to Start a 1031 Exchange

The information that you need to provide your Qualified Intermediary to begin your 1031 exchange is pretty basic. In this article, we will outline all of the info you should have prepared for your qualified intermediary to ensure a smooth 1031 exchange.

Purchase Agreement

First off, it’s a good idea to send the purchase agreement that you’ve entered into (the sales contract that you’ve entered into for the sale of your relinquished property).

Basic Information

Second, you want to provide your basic information (mailing address, phone number, email, and your SSN or your taxpayer ID number “EIN” or “TIN”). Your qualified intermediary is going to need that tax number to open up a separate segregated bank account in which to put your proceeds.

The qualified intermediary typically needs more info than what you’ve given. They will seek out the title/escrow company that’s closing the transaction and request the title report (or title commitment or attorney’s opinion) so they can verify exactly how you’re vested in title, and what the legal description of the property is. So if you know the title/escrow company, provide that information to your qualified intermediary up front.

Open Communication is Key

The most important thing is to communicate openly with your qualified intermediary. If the closing is being moved up a week, let the qualified intermediary know so they can have your documents prepared well in advance of the closing. They need to know of any date changes so they can effectively prepare.

• 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

A Few Basic Things to Know About 1031 Exchanges

When it comes to 1031 exchanges, there is a lot to keep track of. Many exchanges can get complicated very quickly, but there are some essential things that apply to all exchanges. In this article, we are going to cover some basic things to know about 1031 exchanges of real estate.

All Property Needs to Be Like-Kind

The first thing you need to know about 1031 exchanges is that all property involved needs to be like-kind in nature. That means your relinquished property and your replacement property both need to be like-kind. When it comes to real estate, most property is like-kind to most other property.

You Have to Meet Certain Deadlines

You also have to meet some pretty strict deadlines to complete a successful exchange. You have 180 days in total to finish your exchange once you sell your relinquished property and initiate the process. The first 45 days of that period are reserved for identification of your replacement property.

Personal Property is No Longer Allowed

The last tax overhaul passed by Congress excluded personal property from section 1031. That means real estate is the only type of property allowed.

1031 Exchange Company in Minneapolis, MN

CPEC1031 has been providing like-kind exchange services to clients throughout the state of Minnesota and across the country for more than two decades. Our qualified intermediaries have the skills and experience needed to guide you through every step of your exchange – answering any questions, preparing the necessary documents, and advising you. Give us a call today to speak with one of our qualified intermediaries about your like-kind exchange of real 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

Consolidating Commercial Properties with 1031 Exchanges

If you own a lot of little invest properties, your energies are spread over a bunch of different properties over a broad geographic space. That’s a lot of furnaces, and roofs, and properties to keep an eye on.

The Benefit of 1031 Exchanges

Many investors use 1031 exchanges to sell a bunch of little relinquished properties and consolidate that money into one centralized replacement property. If your primary business is to be a real estate broker but you happen to own a bunch of little multifamily housing units, why not sell those little multi-family housing units and purchase an office building in which you can put your real estate brokerage company and maybe still have some space to rent out to a title company, or a mortgage processing company so that you can really focus your equity and your attention on your core business, which is being a real estate broker.

Selling a bunch of little relinquished properties, and pooling those proceeds into one centralized property allows you to focus your attention and maximize the efficiency of your operation.

• 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