Videos

Video - How to Deal with Inherited Property in a 1031 Exchange

When you inherit property from a decedent, you may get a stepped up basis, which means rather than taking the carry-over basis from the decedent, your basis can be stepped up to the fair market value at the time you received that property from the decedent. Section 1014 gives you that stepped up basis. If you sell the property shortly after acquiring it from the decedent, you may not have much gain because your basis was stepped up. We don’t know what the state pegged the value at for estate tax purposes so you need to check with your accountant and perhaps the estate attorney that settled the account of the decedent to see what they pegged the value at for your step up in basis. If you sell it for more than what they pegged it, for estate tax purposes then you may have a gain. You may not have to do a 1031 exchange if you have little or no gain because of the step up in basis.

  • 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

Video - 3 Ways to Identify your 1031 Exchange Replacement Property

In a 1031 exchange you have to identify or designate you replacement property within 45 days after the closing of your relinquished property, which isn’t very much time. Furthermore, it has to be identified in writing clearly and unambiguously describing the replacement properties and it has to be signed by the taxpayer and sent in before midnight of the 45th day. Generally, people use either the three property rule (which restricts the number of properties you can exchange into to three or fewer), or the 200% rule (which allows you to identify properties that in aggregate don’t exceed twice the value of the relinquished property), or the 95% rule (under which you can identify any number of properties buy you have to actually acquire at least 95% of those identified properties). Any of these rules will be valid for identifying your replacement 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

Video - Can You Use 1031 Exchange Funds for Earnest Money Deposits?

In a 1031 exchange, your qualified intermediary needs to hold your 1031 exchange proceeds in a separate account and make sure that you don’t have any actual or constructive receipt of the funds. But the intermediary can advance that money for either the purchase of the replacement property or a deposit (such as an earnest money deposit) for the purchase of the replacement property. So you can use your 1031 funds to advance an earnest money deposit. This is very convenient because it’s probably you preference to use the money in the exchange account to pay your deposits, rather than money out of your own pocket.

  • 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

Video - 1031 Exchange Holding Period Rules

Many people ask – “is there an objective minimum timeframe that one has to hold a property in order to qualify for a 1031 exchange?” Strangely, the answer is no. The IRS seems to have hidden that piece of information by not articulating a bright line holding period in the code or in the regulations. What they say is that you have to have had an intention to use the property for a qualifying purpose of investment or business purposes. One of the important factors in determining if you had that requisite intent is how long you held it. So holding it for a long period of time can be a good fact.

  • 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

Video - How to Control Your Funds in a 1031 Exchange

In a 1031 exchange, you can’t touch the cash proceeds from the sale of the relinquished property. You can’t have actual or constructive receipt of the money. So an intermediary takes possession of the cash proceeds sort of like the synthetic seller. The intermediary becomes the seller of the property and hold onto the proceeds. Your intermediary can hold the proceeds in a separate, segregated bank escrow account to safeguard them. Furthermore, the bank can enter into a qualified escrow deposit agreement that specifies the bank can’t release the funds without the client’s written authorization. So while you can’t have direct control over the funds, you can have an indirect veto power over any disbursements out of the account to protect them from someone absconding with your funds or utilizing them in a way you don’t want.

  • 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