1031 Exchange

10 Additional Benefits Of A 1031 Exchange Besides Deferring Capital Gains Tax

As we’ve discussed on the blog in the past, the most obvious benefit of a 1031 exchange is to take profits from one property and reinvest it into another like-kind property without having to pay capital gains taxes on the money you received from the sale of your relinquished property. That’s a major benefit, but it’s certainly not the only reason people pursue a 1031 exchange. Here’s a quick look at 10 other reasons why a 1031 exchange may be perfect for you:

  1. Exchanging Out Of A Non-Income Producing Asset - You could exchange vacant land for property that will be used to generate more regular income, like a rental property.

  2. Diversify Your Portfolio - You could exchange one property for multiple properties to diversify your investment portfolio.

  3. Consolidation - Conversely, some people like the option of consolidating many properties into one larger investment asset.

  4. Swapping For Assets That Are Closer To You - You could exchange like-kind properties for one that is closer to where you live, making the property easier to manage.

  5. Move Into A Better Market - If you see growth opportunities in another city or state, a 1031 exchange allows you to easily acquire assets in that market.

  6. Hands On/Hands Off Properties - Perhaps you’re looking to take on a very hands-on asset, or you want to shift to a much more passive asset. You can do this through a 1031 exchange.

  7. Improving Cash Flow - Exchanging assets can make it easier to generate improved cash flow on your investments.

  8. Depreciation Options - A 1031 exchange can be used to move away from a fully depreciated asset.

  9. Planning For The Future - Perhaps you plan to move to be closer to your grandchildren or you want to retire to a warmer climate down the road. A 1031 exchange allows you to acquire assets in these areas long before you personally make the move.

  10. No Limits On Exchanges - There are no limits to how many 1031 exchanges you can perform, meaning you can use these exchanges over the years to turn your modest asset portfolio into a real estate empire.

As you can see, there are a number of reasons why a 1031 exchange makes sense for the right investor. To learn more about these benefits, or to talk with an exchanger to see if a 1031 exchange is right for you, give the team at CPEC 1031 a call today at (612) 643-1031.

  • 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Exchanges For Lesser-Valued Properties - Understanding Partial Exchanges

During a standard 1031 exchange, a person exchanges like-kind property for like-kind property of equal or greater value in order to defer paying capital gains on the sale of their relinquished property. But what if you stand to make a significant amount of money on the sale of a property and you can’t find a property to reinvest the full sale amount into? Or maybe you simply want to pull some cash out from the sale to use in other ways. This leads to what is known as a partial 1031 exchange, and in today’s blog, we explore how they are handled and what you need to know when it comes to tax liability.

The Basics Of A Partial 1031 Exchange

As we touched on in the intro, in order to have a fully tax-deferred 1031 exchange, you must purchase replacement property of equal or greater value and put all the net proceeds from the relinquished property towards the new replacement property or properties. If you’re opting not to meet one of those two requirements, you will be moving forward with a partial exchange.

There will be more tax implications for individuals who elect to move forward with a partial 1031 exchange, but you also have some additional options available to you. Some options to discuss with your 1031 advisor include:

  • Purchasing fractional ownership in additional replacement property to make up the shortfall.

  • Offsetting boot with carryforward losses or with depreciation on a newly acquired property.

  • Putting all of the cash from the sale of their relinquished property towards the replacement property and then later pursuing a cash-out refinance on the replacement property.

As you can see, even if you are planning on moving forward with a partial 1031 exchange, you have options to defer paying capital gains taxes. We’d be happy to go over your options and ensure that you make the smartest financial decision during your partial 1031 exchange. To ensure everything proceeds as needed and with your best interests at heart, connect with the team at CPEC 1031 today at (612) 643-1031.

  • 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

RSVP for our Free 1031 Exchange Workshop on 10/31

NEW AND EXCITING 1031 EXCHANGE STRATEGIES AND TECHNIQUES

We’re excited to invite you to join us for an upcoming 1031 exchange workshop on 10/31/23. This informative workshop will cover new and exciting 1031 exchange strategies for 2023 and beyond. We’re offering both in-person and online options for attendees. Read on to learn more about the event details and how to register.

Workshop Details

Level up your tax knowledge to maximize the potential of your real estate investments. Join top experts for this live in-person advanced workshop with online live streaming to learn advanced strategies and 1031 exchange techniques.

  • When: October 31, 2023, 8:30 AM - 10:30 AM (8:00 AM - 8:30 AM registration and free networking breakfast for in-person attendees)

  • Where: Online or in-person at Delta Hotels by Marriott Minneapolis Northeast - 1330 Industrial Blvd NE, Minneapolis, MN 55413

  • Note: No CLE or CE Credits – This is NOT a continuing education class for RE Agents, lawyers or CPAs

Click on the event registration link below to RSVP!

3 Tips For Offsetting Capital Gains

When you profit from the sale of an investment, you will incur a capital gains tax liability. It’s great that you were able to make money on your investment, but capital gains can be taxed at elevated rates, so many smart investors look for ways to offset paying capital gains taxes on investment proceeds. In today’s blog, we take a closer look at a few ways to offset capital gains.

Smart Moves To Offset Capital Gains

At CPEC1031, we’re always looking for ways to help you keep more of your hard earned money. Here are five smart financial moves you may be able to make in order to reduce your capital gains tax liability.

  • Consider A 1031 Exchange - We’ll start with a tip we have a wealth of experience with. A 1031 exchange allows you to move all of the funds from the sale of one property into the purchase of another like-kind property without having to pay taxes on the proceeds of the sale. If you are looking to move on from one investment opportunity and into another, a 1031 exchange is a very financially-wise move.

  • Offset With Losses - Some assets do really well, while you may lose money on others. You can sell other assets at a loss to offset some or all of the capital gains you realized on other assets. This is oftentimes referred to as tax loss harvesting.

  • Minimize Taxable Income - If you expect to have capital gains this year, you should consider doing what you can to reduce your taxable income. Increasing your contributions to your IRA or 401(k) or reducing your taxable income through other investments like municipal bonds can help to minimize your short-term capital gains rate.

You worked hard for your money, and by taking a few smart steps, you can hang on to more of it by lowering your capital gains tax liability. For more information on navigating capital gains taxes or 1031 exchanges, please give the team at CPEC 1031 a call today at (612) 643-1031.

  • 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

Can I Relinquish Multiple Properties In A 1031 Exchange?

If you are considering a 1031 exchange, you may have a number of questions about the best way to navigate the transaction. One common question that we receive when working with clients who are relatively new to a 1031 exchange is whether or not they can sell multiple properties during an exchange. We explain whether that is allowed, and how to ensure you conduct the exchange properly when relinquishing multiple properties.

Relinquishing Multiple Properties During A 1031 Exchange

While a typical 1031 exchange involves the exchange of a like-kind property for another, oftentimes a client will want to move on from multiple properties at the same time. As long as this exchange follows all of the rules and requirements, it is perfectly acceptable to relinquish multiple properties. You can also acquire multiple replacement properties and relinquish a singular property.

When exchanging multiple properties, there are some considerations that you’ll want to be aware of in order to ensure full tax deferral. You will want to ensure that the replacement property is worth as much or more than the combined value of relinquished properties #1 and #2. You’ll also need to apply all of the cash generated by the relinquishment of the two properties towards the acquisition of the replacement property. And finally, any debt that is resolved upon the transfer of relinquished properties #1 and #2 is replaced with new debt or new cash in the acquisition of the replacement property.

This may sound a bit complex, and to the inexperienced asset manager it certainly can be. Even those with years of experience would benefit from having the entire process streamlined by working with a Qualified Intermediary to ensure any asset exchange is handled correctly and within the Internal Revenue Code. An innocent mistake can prove costly, so put those fears to bed by working with a team that has facilitated countless 1031 exchanges over the past two decades. For help with your 1031 exchange, turn to the team at CPEC 1031. Give our team a call today at (612) 643-1031.

  • 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

Defer the tax. MAXIMIZE your gain.