Tips for Finding 1031 Replacement Property

If you're doing a 1031 exchange you may find that the 45-day identification period goes by way too fast. So today we're going to talk about some tips for locating or finding the 1031 replacement properties to identify during those first 45 days.

Other Trusted Advisors

If you’re a real estate investor you may not have the biggest window on the world of all of the potential replacement properties that may be available to satisfy your exchange. So other trusted advisors can be brought in to widen your window of potential replacement properties.

Financial Planner

A very good resource to talk to is a financial planner that specializes in products that satisfy 1031. These are typically either Delaware Statutory Trusts or tenancy-in-common investments. These are syndicated securities that can only be marketed to accredited investors.

Commercial Real Estate Broker

Another important resource that can widen your window of potential properties is a commercial real estate broker that has the designation CCIM or SIOR. These are real estate agents that have specialized experience in commercial real estate and can offer up possibilities you may not have been aware of.

The most important thing is to start the process early. Get out there looking even before you’ve sold your relinquished property to get a feel for what you may want to designate, understanding that the 45 day identification period goes by way too fast.

• Start Your 1031 Exchange: If you have questions about finding 1031 replacement property, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved

Acquiring 1031 Property as an Individual vs. Corporation

If I sell my property that was held in my individual name can I acquire my like-kind replacement property in my corporation? That’s our topic for conversation in this article.

Same Taxpayer Requirement

The short answer is no. Remember that the same taxpayer that sold the relinquished property needs to be the same tax payer that acquires the replacement property.

Oftentimes corporations are viewed as a separate or different taxpayer. They have their own EIN number, the stockholders may be the same as the owner of the relinquished property but they're probably not viewed as a disregarded entity or pass through for the purposes of 1031s.

Individual or Disregarded Entity

A more appropriate purchaser of the replacement property would either be the individual that owned the relinquished property or a disregarded entity such as an LLC that is wholly owned by the individual that sold to relinquished property.

• Start Your 1031 Exchange: If you have questions about corporations, stockholders, and 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved

Who Should Sign the Purchase Agreement for the Replacement Property?

Taxpayers doing a 1031 exchange, especially a reverse exchange, often ask “who should sign the purchase agreement for the replacement property?” That’s our topic for this 1031 education article.

1031 Purchase Agreement

The easiest way to tackle this issue is to have the name of the taxpayer that owned the old relinquished property enter into the new replacement property purchase agreement.

That way when we need to switch the name of the purchaser right before the closing of the replacement property to an exchange accommodation title holder, which is typically an LLC owned directly by the qualified intermediary, we have the right under the purchase agreement to assign the purchase agreement to that actual purchaser.

Modifications & Amendments

However, all of that time before closing it will be the taxpayer who is on the purchase agreement, so if there needs to be a modification to the purchase agreement or some amendment needs to be made, the taxpayer that originally signed the purchase agreement is in the driver's seat to make modifications and to make negotiations that change the purchase agreement right up until the moment before closing.

• Start Your 1031 Exchange: If you have questions about the 1031 purchase agreement, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved

Dealing with 1245 Property in a 1031 Exchange

Recently I put on a 1031 continuing education class in Rochester, MN that was sponsored by Capstone Financial. One of the participants in the class asked some interesting questions that I  want to expand on in this article.

1245 Property

Here was the participant's question:

"How do you deal with accelerated depreciation that is taken on the relinquished property from a cost segregation study or from other components for example that might be on a farm - what we would call 1245 property?"

If there is a significant amount of 1245 property, you need to work with your tax adviser to make sure that you have, on the replacement side, components that are 1250 property to satisfy your traditional 1031 exchange. But you may also have to acquire components of the replacement property that match up with the old 1245 that you had on the relinquished property.

A Farm Example

So in the context of a farm, there may be pig pens, sheds, silos, and other items that are 1245 property. You may need to make sure that you're buying a replacement property that has similar 1245 components like fiber optic cabling, for example.

• Start Your 1031 Exchange: If you have questions about exchanges of 1245 property, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved

Practice Tip for Identifying 1031 Replacement Property

In this 1031 FAQ video, Jeff Peterson offers up a practice tip for identifying your replacement property in a 1031 exchange. Watch more 1031 educational videos here.

• Start Your 1031 Exchange: If you have questions about replacement property identification in a 1031 exchange, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved