The Importance of Record Keeping in a 1031 Exchange

A 1031 exchange allows you to defer your capital gains when selling real estate, as long as you pass your sales proceeds into replacement property. You can continue exchanging property in this manner for years, decades, or even indefinitely. But doing so makes it absolutely essential to keep full and accurate records of all your 1031 exchanges. In this article, we’re going to discuss the importance of keeping accurate records for all of your 1031 exchanges.

Always Be Prepared for an Audit

As a good rule of thumb – always be prepared for an audit. You never know when or if you’ll be audited, but it’s best to prepare yourself accordingly for the possibility. Having full and accurate records of all your 1031 transactions will make things a lot easier in the event of an audit.
In addition, make sure that your records are easily accessible and comprehensible to your heirs and/or executor, in the even that your 1031 properties end up in the hands of your estate.

1031 Exchange in St. Paul, MN

If you are looking to save money when selling real estate – a 1031 exchange allows you to defer your capital gains taxes on your sale as long as you move that money into a continued investment. This has the added benefit of keeping your money compounding and building wealth over time. Talk with one of our qualified intermediaries now to see if you are a good candidate for 1031 exchange. Our intermediaries have been helping investors with their like-kind exchanges for more than twenty years.

• 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

Tips for Deferring Taxes & Profiting from Real Estate

Investing in real estate can be very profitable, but that’s not a guarantee. You need to understand the market, know when to sell / buy, and much more. One of the best tools in a real estate investors arsenal is the 1031 exchange. In this article, we are going to discuss how to profit from real estate while simultaneously deferring taxes with a 1031 exchange.

The Purpose of Section 1031

The purpose of section 1031 of the Internal Revenue Code is to incentivize real estate investors to continue investing their money in the market (thus leading to overall economic growth as a result). There is also a direct benefit to the taxpayer conducting the 1031 exchange in that they are able to defer their capital gains taxes on the real estate sale and keep their money building wealth in a continuing investment.

The next time you’re thinking about selling a piece of real property – consider a 1031 exchange first. As long as you meet all the benchmarks, you can defer your taxes and keep your profits working for you in a bigger, better property.

Save Money on Your Next Real Estate Transaction

If you are looking to save money on your next real estate transaction, consider a 1031 exchange to defer your capital gains taxes. With more than 20 years of experience under our belts, our qualified intermediaries have the resources to ensure that your exchange goes off without a hitch. We can prepare all of your 1031 documents and answer any questions you might have. Contact our intermediaries today at our downtown Minneapolis office to get your exchange up and running.

• 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

What to Know About 1031 Exchange Purchase Prices

In a 1031 exchange, can a person purchase several smaller properties/units (less that the purchase price of the original investment) as long as they add up to or greater than the sale price of the relinquished property? This is a great question and the topic of today’s blog.

The short answer is yes – as long as all of the multiple replacement properties add up to or are greater in Value and Equity than the sale price of the relinquished property.

The Napkin Test (with Multiple Replacement Properties)

There are three general rules of thumb to quickly see if you will defer ALL of the recognition of gain:

1.   Typically you will acquire replacement property that is “up or equal” in Value* (price); {*net of sales commissions and customary transactional expenses}

2.   You will roll over all of your Equity (net proceeds) from the relinquished property into your replacement property.

3.   And to the extent that you were relieved of liabilities and Debt, such as mortgages on your old relinquished property, the debt relief is offset by:

• new liabilities or mortgages taken on in conjunction with your purchase of the replacement property; OR

• investing additional cash in the replacement property equal to the amount of liabilities and debts that were discharged.

You can have a partial tax deferral if you miss these general benchmarks.

Be sure to check with your CPA about these general rules of thumb, to make sure they apply to your specific situation.

• 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

Consider a 1031 Exchange in Your Retirement Planning

There’s a lot to consider when planning for retirement. One useful retirement planning tool that many people don’t even think of is the 1031 exchange. In this article, we’re going to talk about how to rethink your tax considerations when planning for retirement.

Tax Considerations

One of the biggest factors involved in retirement planning is taxes. You want to prepare yourself for retirement in the most tax-advantageous way possible. There are a lot of strategies that should be discussed with your financial planner, CPA, or tax advisor.

Consider How a 1031 Exchange Might Fit Into Your Retirement Plan

A 1031 exchange can be a great retirement planning tool. If you currently own a management-intensive property that you don’t want to deal with in retirement, a 1031 exchange allows you to sell that property and acquire another one while deferring your capital gains taxes. As a result, you can exchange your management-intensive property for a property that provides more hassle-free passive income.

Set up Your Like-Kind Exchange

Engaging in a 1031 exchange, rather than an outright sale, of your real estate can help you avoid a huge capital gains tax bill. While every taxpayer can avail themselves of the tax-saving benefits of a 1031 exchange, the exchange process is complicated and requires the help of a pro. That’s where the qualified intermediaries at CPEC1031 come in. We have more than two decades of experience facilitating 1031 transactions for clients in Minnesota and across the United States. Contact us today for help setting up your like-kind 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

After a 1031 Exchange, When Will You Get Your Funds Back?

If I don’t spend all of the 1031 exchange funds, how long do I have to wait to get back my money? That’s the topic for this article.

1031 Exchange Timelines

The essential question is this: when is your exchange ending? If you don’t identify any replacement properties within the first 45 days (ending at midnight of the 45th day), the exchange is over and any unused exchange funds could then be returned to you the next day (really the next business day).

However, if you did identify replacement property your exchange will continue after the 45th day and you won’t be able to get your unused exchange funds until you buy and receive those identified replacement properties, which would then end your exchange. If there are no more properties on the chopping block to acquire then the exchange is done.

Worst Case Scenario

The worst case scenario is that your 1031 funds are locked-up in the 1031 escrow account for the maximum exchange period of 180 days. After 180 days the exchange period is over and you can receive back the unused exchange funds. However, any funds that you get back may be subject to taxes.

• 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