South Dakota 1031 exchanges are a great tool to defer your capital gains taxes when selling real property in the state of South Dakota. However, there is a lot that can potentially go wrong during the course of a 1031 exchange so you want to make sure you have the best information and professionals on your team to ensure your exchange is a success.
The Basics of a 1031 Exchange in South Dakota
In a South Dakota 1031 exchange, a taxpayer sells a piece of investment property and then moves their sales proceeds from that sale into a new replacement property. When done correctly, this process allows the taxpayer to defer their capital gains tax burden on the sales proceeds. This has the ultimate benefit of keeping their money compounding wealth in a continued investment.
South Dakota 1031 Exchange Requirements
As is the case with any 1031 exchange, South Dakota 1031 exchanges must meet certain requirements in order to be considered successful. Here are some of the basic requirements for conducting a successful like-kind exchange in the state of South Dakota:
Timing Requirements. South Dakota 1031 exchanges must abide by strict time deadlines. Once you begin your like-kind exchange, you have only 180 days total to complete it. During the first 45 days of that 180 day period, you also must clearly identify the replacement property that you intend to use in the exchange. There are some exceptions to these deadlines, but they are rare. In the majority of cases, you are going to need to keep your exchange within these time constraints.
Like-Kind Requirements. All property involved in your South Dakota 1031 exchange must be like-kind. Thankfully, the definition of like-kind in the world of real property is quite broad. Most real estate is considered like-kind to most other real estate.
Qualified Purpose Requirements. Not all real estate may be used in a 1031 exchange. The real estate involved in your exchange must be held for a qualifying purpose – for use in your trade or business, or for investment purposes. Any other property, such as your primary residence, is not allowed to be used in a 1031 exchange transaction.
These are the major requirements for doing a 1031 exchange in South Dakota, but there are many other details involved. Be sure to consult with a South Dakota qualified intermediary to make sure all of your bases are covered.
Resources for 1031 Exchanges in South Dakota
We’ve put together a list of online resources that may be useful if you are conducting a 1031 exchange in the state of South Dakota. Click on the links below to learn more:
South Dakota Like-Kind 1031 Exchange Professionals
Every state has its own idiosyncrasies when it comes to 1031 exchanges, and South Dakota is no different. It’s important to work with a like-kind exchange professionals who understands the laws and customs of your state in order to ensure the success of your 1031 exchange. At CPEC1031, LLC our qualified intermediaries have more than twenty years of experience working with clients on like-kind exchanges in South Dakota and across the United States. We facilitate 1031 exchanges in Sioux Falls, Rapid City, Pierre, Sturgis, Deadwood, and more! Our team of 1031 exchange professionals can walk you through the process and make sure all your questions are answered. Contact us today to learn more about the full extent of our services and see how we can help you defer capital gains taxes on the sale of investment real estate.