In a 1031 exchange, the qualified intermediary acts as an insulator by temporarily taking possession of the sales proceeds and, under a contract, utilizing that money to purchase replacement property as a continued investment.
That property needs to be identified clearly and unambiguously within 45 days after the closing of your relinquished property. The most common identification rule is the “three property rule,” under which you can identify any three like-kind properties. For example, in Minneapolis you could identify the IDS Center, the Foshay Tower, and the Wells Fargo Center. These are three incredibly expensive pieces of property, but that doesn’t matter for 1031 exchange purposes. Under the three property rule you can identify three or fewer properties – regardless of how expensive they are.
An alternative 1031 identification rule is the “200% Rule.” Under that rule, you are allowed to designate more properties so long as the total value of the properties you identify cannot exceed twice the value of what you relinquished. Let’s say you sold a property for $1 million. Under the 200% rule, you could identify up to $2 million worth of replacement property – regardless of the total number of properties identified.
Discover the Benefits of the 1031 Exchange
Any United States taxpayer can utilize a 1031 exchange to defer capital gains taxes on the sale of qualifying investment real estate. Realize the tax-saving benefits of section 1031 by discussing the process with a qualified intermediary. At CPEC1031, LLC our intermediaries have decades of experience facilitating like-kind exchanges under section 1031 of the Internal Revenue Code. Our intermediaries can work with you throughout the entire process – answering all of your questions and clearing up any confusion along the way. Contact us today to set up a time to chat with our team of 1031 intermediaries.
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.
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