Be Mindful of These Potential 1031 Exchange Traps

1031 exchanges are complex – there are many rules you need to abide by in order to complete a successful exchange and fully defer your capital gains taxes. In this article, we are going to outline some potential traps you might encounter during the course of your 1031 exchange.

Running Out of Time

This is the easiest issue to run afoul of if you’re not careful. 1031 exchanges are bound by strict timelines that cannot be exceeded (except in very rare cases). Specifically, you have only 180 days in total to complete your exchange process after you start it. If you do not finish the process within that timeline, your exchange will fail and you won’t be able to defer your capital gains tax burden.

Only Deferring Some of Your Capital Gains Taxes

In an ideal 1031 exchange, you want to defer 100% of your capital gains taxes. But in order to do that you need to make sure that the replacement property you’re exchanging into is greater in value, equity, and debt compared to your relinquished property. Otherwise you may only be able to defer some of your gains.

Start Your 1031 Exchange Journey Today

Start your 1031 exchange journey today with one of the qualified intermediaries from CPEC1031, LLC. Our company has over two decades of experience working with clients on their like-kind exchanges. We have the knowledge and experience to work with you through every stage of the 1031 exchange process and make sure you are able to defer all of your capital gains tax burden. Reach out to the team at CPEC1031 today to learn more about the benefits of 1031 exchanges and get started with your next like-kind exchange of real estate.

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

Consider These Questions Before Starting a 1031 Exchange

There are many things to consider in a 1031 exchange, but before you begin the process, you need to ask yourself a few basic questions. In this article, we are going to walk through a few questions to consider before starting your 1031 exchange of real estate.

Does Your Property Qualify for 1031 Exchange?

The first question you need to ask yourself is: “does your property qualify for 1031 exchange?” This question is important because some property is not eligible for 1031 exchange treatment. Personal property is excluded outright. Only real property is eligible for 1031 exchange. But not all real property qualifies either. Only real property held for investment or business use is eligible. That means if you are holding your real property for personal use, you won’t be able to use it in a 1031 exchange.

What Replacement Property Do You Intend to Exchange Into?

It’s also important to think about what type of replacement property you want to exchange into. You have only 180 days to complete the exchange once you begin, so it’s important to get a jump on the process and start thinking about your replacement property beforehand so you have plenty of time.

We’re Here to Help You Through the 1031 Exchange Process

The qualified intermediaries at CPEC1031, LLC are here to help you through the 1031 exchange process. Let our team of professionals help you with all the details surrounding your like-kind exchange of real estate. Contact us today to learn more about the process of conducting a 1031 exchange and see how you can benefit from 1031 tax deferral. Our office is located in downtown Minneapolis but we work with clients throughout the entire state of Minnesota, as well as the United States as a whole.

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

Capital Gains Tax Options When Selling Investment Real Estate

When you sell a piece of investment real property, you have several options to consider when it comes to capital gains taxes. In this article, we are going to outline some of your options for dealing with capital gains taxes when selling investment real estate.

Pay the Capital Gains Taxes in an Outright Sale

The simplest and least tax-advantageous option at your disposal is to simply sell the investment property in an outright sale. This is often the easiest method, but it triggers a capital gains tax burden that can be quite hefty depending on the details of your transaction.

Defer the Capital Gains Taxes via a 1031 Exchange

If you want to sell your investment property but are hesitant to pay a large capital gains tax bill, then a 1031 exchange may be the best option for you. A like-kind exchange is often the most tax-advantageous method for selling investment real estate as it allows you to defer your capital gains tax burden so long as you reinvest all of your net proceeds from the sale into a like-kind replacement property.

1031 Exchanges – Great Vehicles for Tax Deferral

1031 exchanges are great vehicles for tax deferral when selling real estate that qualifies for like-kind exchange treatment. Before you begin the process, you need to make sure that your property is a good fit for a like-kind exchange. A qualified intermediary is an excellent resource who can answer all of your questions about 1031 exchanges and help ensure you can defer 100% of your capital gains taxes. CPEC1031 intermediaries have more than two decades of experience doing just that. Reach out to us today at our downtown Minneapolis office to learn more about how we can help you through the 1031 exchange process.

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

When a Reverse 1031 Exchange May Be Your Best Option

If you’re thinking of doing a 1031 exchange, you have several types of exchanges to consider – forward exchanges, build-to-suit exchanges, and reverse exchanges. Determining which type of exchange is right for you can be difficult. In this article, we are going to talk about when a reverse 1031 exchange may be your best option when selling investment real estate.

When the Real Estate Market is Competitive

Perhaps the best time to conduct a reverse 1031 exchange is when the real estate market is hot. One trap that trips up many taxpayers conducting 1031 exchanges is the 180 day time period. Once you begin your exchange, you have just 180 days to finish the process. If you can’t find a replacement property within that timeframe, your exchange is in danger of failing. This can be a particular concern when the real estate market is competitive and properties are being snatched up quickly.

With a reverse exchange you can lock down your replacement property before you sell your relinquished property. This allows you to secure a replacement property that you like before someone else is able to get it first.

1031 Exchange Professionals Located in Minneapolis, MN

If you’re looking for help with your 1031 exchange of real estate, you’ve come to the right place! CPEC1031, LLC is a full service like-kind exchange company providing qualified intermediary services to clients throughout the United States. We have more than two decades of experience working on 1031 exchanges of all kinds. We can help you through the many details of your next 1031 exchange and make sure you are able to defer 100% of your capital gains tax burden. Reach out to us today to learn more about our 1031 exchange services and see how we can help!

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

6 Types of Disregarded Entities That May Be Involved in a 1031 Exchange

Many 1031 exchanges of real estate involve disregarded entities. Here is a summary of some of the various types of entities that can be classified as disregarded entities or DREs, along with some relevant details:

1. Sole Proprietorships DBA. Sole proprietorships doing business under a business name are not really separate legal entities; they are simply extensions of the individual owner. Income and expenses are reported on the individual’s personal tax return (Form 1040, Schedule C).

2. Some grantor trusts. Certain grantor trusts are treated as disregarded entities for federal income tax purposes. The income generated by the trust is reported on the grantor's personal tax return.

3. Single-Member Limited Liability Companies (LLCs). A single-member LLC is treated as a disregarded entity unless it elects to be taxed as a corporation. The owner reports income and expenses on their personal tax return.

4. Wholly Owned Partnerships. When a partnership has only one unique owner, it is treated as a disregarded entity for tax purposes.

5. Qualified Subchapter S Subsidiaries (Q-Subs). A Q-Sub is an entity that is wholly owned by an S corporation and is treated as a disregarded entity for tax purposes.

6. Qualified Real Estate Investment Trust Subsidiaries. These are subsidiaries that qualify under specific IRS rules and are disregarded for tax purposes.

1031 Exchanges Come in Many Forms

1031 exchanges come in a variety of different forms – each with its own benefits. A qualified intermediary can help you determine which type of exchange is best suited to your needs. At CPEC1031, LLC we focus exclusively on the facilitation of 1031 exchanges. Our qualified intermediaries have more than two decades of experience and are on hand to help you through the details of your next like-kind exchange of qualifying real estate. Contact our team of professionals today to set up a time to chat and start realizing the benefits of section 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved