Video - How The Tax Reform Act of 2018 Impacted 1031 Exchanges

The tax reform act of 2018 modified 1031 exchanges severely and limited the scope of 1031s to just real estate. Prior to 2018, we were able to do 1031 exchanges of other business equipment such as fleet automobiles, airplanes, railcars, etc. However, Congress has made the decision to limit the scope of this tax deferral to only 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

Video - Tax Considerations when Selling Investment Real Estate

When you sell real estate, you may have a whole bunch of different tranches of tax. Investment property can be subject to NIIT (Net Investment Income) tax. Furthermore, if you depreciated the property while you were in ownership you may be subject to depreciated. If some of those components were rapidly depreciated you may have higher tax liability on that portion of the gain. Generally, depreciation is taxed at a higher rate than the preferred rates you get for normal capital gains. Certain accelerated depreciation can be taxed almost like ordinary earned income. Then you have routine capital gains on the appreciation that can occur over time. In some states and municipalities there can be local taxes applicable to your sale. It’s always a good idea to work with your local tax advisor who knows the nuances and practices in that particular area to get an illustration of what the fees and taxes will be at the state, federal and municipal level.

• 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 1031 Exchange Real Estate Fixtures?

Prior to 2018’s tax code changes, we were able to do 1031 exchanges of non-real estate such as personal property (boats, airplanes, railroad cars, and the like). Today, 1031 exchanges are limited to real estate. However, there are certain fixtures that are incorporated into a building such as a water heater or specialty lighting that may still be eligible for rapid depreciation as if it were a separate component. Nonetheless, these items are treated as real estate fixtures for 1031 purposes.

• 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 - Replacement Property Purchase Agreements

Many people wonder if they can find a patient seller of the replacement property and put the handcuffs on that seller by signing an option agreement or a purchase agreement so you know you’ve got a sure thing to identify and close on. The answer is yes. If you can find a patient seller that will allow you to sign a standard purchase agreement, you can lock them up. Then you can identify that property and quickly close on it. Or you can do a reverse exchange and have your qualified intermediary acquire the property under rev. proc. 2037 in a safe-harbor reverse exchange. You can go out and curate your own success by locking down the replacement property. What you can’t do is exchange into a property that you already own. You can’t buy a property on a contract-for-deed or executory contract that would give you rights of possession and shift equitable title to you prematurely. You’ve got to be careful not to buy the property and take the benefits and burdens of ownership before you’ve disposed of your relinquished 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 1031 Exchange Into a Property that You Don’t Identify Within 45 Days?

Let’s say you’re doing a 1031 exchange and you’ve sold your relinquished property and you’re money is with the intermediary. Now you’re scrambling like a chicken with its head cut off trying to identify replacement properties that you can designate on the replacement property identification form. That form has to be transmitted to the intermediary after you’ve clearly and unambiguously described the properties, signed the identification form, and sent it into the intermediary. What happens on day 46 if your dream property pops up and you did not identify it during the 45 day identification period? It’s not on your replacement property list so it’s not eligible for 1031 treatment. So your dream property that becomes available after your identification period is not a property you can use your exchange funds for. Even if you did, it wouldn’t be considered like-kind property because it wasn’t designated properly with the time deadlines. 

• 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