Videos

Video - 1031 Exchanging Into Multiple Properties

Can you buy multiple properties to complete a 1031 exchange? Yes, provided you identify all the properties you are going to purchase. You have to designate them within 45 days after the closing of your relinquished property. They have to be clearly described. If you do that you can cobble together multiple properties to get to the requisite value that you need to attain from an accounting perspective to defer your gains.

Let’s say you sold a property for $500,000 and you identified three replacement properties each worth $250,000 for a total of $750,000 in replacement properties. You can spread your equity over those properties any way you want so long as you reinvest all of your equity into those three properties. What a lot of people do is they put a lot of cash down on one of those three properties and put the minimum down on each of the other two because if they ever need to refinance or draw out some equity, they want to have all of their cash consolidated in one target property. That way when they refinance their property they don’t have to encumber the other two.

  • 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 - Why Personal Property is Not Allowed in a 1031 Exchange

Prior to 2018, you could 1031 exchange personal property for personal property. An example would be an airplane for an airplane, or a helicopter for a helicopter. However, you can now only 1031 exchange real estate for other like-kind real estate. Within that broad category of real estate there is a great degree of opportunity to exchange into different geographic areas and segments. You can go from Arkansas to New York, or you can go from unimproved agricultural property to improved property. You can change the type of investment that you’re in as well. For example, many people like to exchange into multi-family real estate, or office space, or hotels. Whatever you fancy, you can exchange into. The really interesting thing is folks that are exchanging to other states in order to avoid inheritance or estate taxes. Exchanging into a tax-friendly state may be a way to enhance how much the next generation is able to inherit because you’re escaping some of the higher tax states.

  • 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 Tips for Dealing with Self-Directed IRAs

Self-directed IRAs are a whole different way of deferring gains. What people are doing with self-directed IRAs is that they’re accumulating wealth inside of their qualified plan so that all of that accumulation goes untaxed while it’s inside of the plan. But there are limitations on self-dealing. You can’t derive personal benefit from your self-directed IRA. Therefore, you can’t really occupy the properties that are owned by your self-directed IRA. You may not even be able to loan money on a recourse basis that benefits your IRA. Anyone doing a transaction with their self-directed IRA will need to encircle themselves with good tax advisors because there are a number of rules that limit what you’re able to do.

  • 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 - Creating a Contractual Nexus in a 1031 Exchange

In a 1031 exchange, you generally want to move all of your equity into the new replacement property, which means you don’t want to inappropriately siphon proceeds out of the sale of the relinquished property. Sometimes a situation arises where you owe money from the relinquished property but it’s not evidenced by a mortgage or deed of trust. There may be an informal loan tied to the property but there isn’t any lien in the real estate record or perhaps any contractual nexus between the loan and the sale of the property. Many investors want to pay off those loans when they sell the relinquished property but the problem is how to connect the debt to the closing statement. One way to accomplish that is to do an amended and restated note between the lender and the borrower that specifically says if the property is ever sold the debt has to be discharged or satisfied. Another way to create a contractual nexus is to add an addendum to the purchase agreement between the buyer and seller that says the seller has an obligation to the lender and as a material and substantial condition of the sale contract, the seller will be obligated to satisfy and release that obligation as part of the closing. So there are ways to create a contractual nexus between the unsecured debt that is more mentally tied to the property than it is legally tied to the property. That is a way to potentially use those sales proceeds to discharge that loan obligation as part of the sales transaction. This is complicated stuff. This is where you want to bring in your accountant and perhaps even a tax attorney to help you solidify the contractual nexus between the sale of the property and the discharge of this loan.

  • 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 - Choosing a Bank to Hold your 1031 Exchange Funds

If clients are worried about the solvency of the bank that’s holding their funds in a 1031 exchange, you want to look to the size of the bank that’s holding the money. There are some banks in the US that are considered too big to fail (in other words, the government would never allow them to fail). So the first thing you want to ask yourself is “am I holding the exchange funds in a bank that’s too big to fail?” Then there are other programs that will disburse deposits through programs that have participant banks in them so that your monies are disbursed so that you always have FDIC coverage because your deposit is disbursed through a network of banks, each bank holding up to the FDIC coverage amount, which is $250,000 per account holder. The logical next question is “what about the solvency of the banks in that network?” Even if you’re covered up to the FDIC amount, what if the bank goes under and it takes you a year to get your money from the FDIC? Use a big bank to hold your funds – a bank that’s too big to fail. And get your money redeployed as quickly as possible. You don’t have to stay in the exchange for the full 180 day period and the sooner you get your money back to work for you, the quicker you’ll have peace of mind.

  • 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.