What Does it Mean to Participate in a 1031 Exchange?

What exactly does it mean to participate in a 1031 exchange? There are many potential benefits to the taxpayer. In this article, we’re going to talk about what it means to participate in a 1031 exchange of real estate.

Capital Gains Tax Savings

The most meaningful benefit of participating in a 1031 real estate exchange is the resulting capital gains tax deferral. In most real estate sales, the seller is hit with a capital gains tax bill for the sale. 1031 exchanges offer the seller an alternative to paying these capital gains taxes. Participating in a 1031 exchange allows the seller to defer this tax bill and keep that money working proactively in a continued investment, rather than writing a check to the government.

While that may sound simple, there are a lot of rules and benchmarks you need to follow in order to complete a successful 1031 exchange. You’ve got to finish the exchange within set timeframes, and you need to make sure your property qualifies for 1031 treatment in the first place.

Get Your Exchange Started

At Commercial Partners Exchange Company, we provide qualified intermediary services to clients in Minnesota and throughout the United States. With more than twenty years of experience, our 1031 exchange professionals are well-equipped to help you defer taxes with an exchange of real property. We can prepare all of your paperwork, answer all of our questions, and advise you. Contact us today at our office in downtown Minneapolis to talk with one of our qualified intermediaries about your 1031 real estate exchange.

• 1031 Hotline: If you have questions about the 1031 exchange process, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

The 1031 Exchange Process: Preparation & Relinquished Property Closing

The 1031 exchange process can be long and complex, but we're here to simplify things for you. In this article, we are going to talk about the 1031 exchange process - from preparation to the closing of the relinquished property.

Purchase/Sale Agreement for Relinquished Property

Complete your purchase/sale agreement as to your Relinquished Property (the property you are selling) just as you would with a regular sale. Show the name of the seller as yourself and add “and or assigns.” You should also add a cooperation clause to the purchase agreement, stating that you intend this transfer to be part of a 1031 Tax Deferred Exchange and require the buyer to cooperate. The cooperation clause serves to provide notice to your buyer that you intend to consummate a tax-deferred exchange, as required by the regulations. 

Closing Company

Arrange for a title company or an attorney to close your transaction. Make sure you tell the closing agent that this transaction is going to be a 1031 exchange.

Exchange Company

Notify Commercial Partners Exchange Company, LLC (“CPEC”) of your pending sale and closing date. We provide a customer application form to organize all of the information about you as the taxpayer/exchanger, the property you are selling and the approximate date of closing. Fax the customer application form and the purchase/sale agreement to (612) 395-5475.

Closing on the Relinquished Property

CPEC will contact the closing agent and acquire any additional information needed to set up the 1031 Exchange for you. We will prepare the Exchange Documents and send two (2) sets of the documents directly to the closing agent. At closing, you will sign the Exchange Documents along with your other closing documents. The closing agent should give you one set of the documents for you to keep for your tax records and send one set to CPEC, together with a copy of the closing statement and deed transferring title to your Buyer.

Post Closing Activities

Once the closing is complete, the closing agent will wire transfer the proceeds into a separate, segregated and “two signature” FDIC insured exchange escrow account. Upon receipt of these funds and a set of the Exchange Documents, we will send you a letter showing the amount of proceeds we received in the wire, which amount should match the amount shown on the closing statement. This letter will also include the dates of the 45 and 180 day periods and a form to identify your Replacement Property (“timeframe letter”).

• 1031 Hotline: If you have questions about the 1031 exchange process, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

The Importance of Early Preparation in a 1031 Exchange

It’s a good general rule of thumb to start prepping your 1031 exchange as early as possible. Unfortunately, many taxpayers don’t make the proper preparations and find themselves in a bind late in the process. In this article, we are going to discuss the importance of early preparation when conducting a 1031 exchange.

It’s Never Too Early to Contact a Qualified Intermediary

We hear from many taxpayers who want to do a 1031 exchange at the zero hour and are unable to avail themselves of the tax-saving benefits of a 1031 exchange because they’re too late.

The earlier you can start preparing for your 1031 exchange, the better off you’ll be. Contact your qualified intermediary before you even sell your relinquished property so you can work together and make sure everything goes according to plan. It’s never too early to call your qualified intermediary.

1031 Exchanges in the Twin Cities

1031 exchanges allow you to defer your capital gains taxes on the sale of real property under section 1031 of the IRC. If you are interested in deferring your gains and keeping your money working for you in a continued investment, a 1031 exchange might be right for you. Contact a qualified intermediary to discuss your options. At Commercial Partners Exchange Company, our intermediaries have two decades of experience helping taxpayers with their 1031 exchanges. Reach out to us today at our downtown Minneapolis office to get started with your exchange!

• 1031 Hotline: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Why Do a 1031 Exchange of Your Property?

Many people have heard of 1031 exchanges but aren’t sure why they should consider doing one. In this article, we’re going to talk about why it may be a good idea for you to 1031 exchange your property.

Tax Deferral

A 1031 exchange offers you a potentially huge tax deferral. In a typical 1031 exchange (assuming you meet all the requirements) you are able to defer all of your capital gains taxes on the sale of your property so long as you roll those sales proceeds into a replacement property of equal or greater value. This is a great way to avoid a potentially big tax windfall.

Compounding Interest

Another benefit is that you get to keep your hard-earned money working for you. Instead of writing a check to the government for your capital gains taxes, you get to keep that money compounding and building in your replacement property. In a sense, your money keeps working for you over time, rather than going to a tax payment.

Minneapolis Qualified Intermediary Company

At Commercial Partners Exchange Company, we help investors defer capital gains tax on the sale of real property under section 1031 of the Internal Revenue Code. We have over two decades of experience facilitating real estate exchanges of all shapes and sizes. If you are interested in learning more about the tax-deferral benefits of a 1031 exchange of real estate, contact us today at our downtown Minneapolis office and speak with one of our qualified intermediaries about your exchange.

• 1031 Hotline: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Does a Motor Home Qualify for 1031 Exchange Treatment?

The new tax law has a lot of 1031 investors asking questions. In this article, we are going to tackle the question: can a motor home be exchange in a 1031 transaction?

Tax Reform

The short answer is no, you cannot exchange your motor home in a 1031 transaction. As a result of the recent tax law that went into effect on January 1, 2018, only real property may be exchanged in a like-kind tax deferred transaction under 26 USC 1031. The code now states that:

Section 1031(a) Nonrecognition of gain or loss from exchanges solely in kind

1. In general, no gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.

Check out this article for more information. 

• 1031 Hotline: If you have questions about 1031 exchanges and the new tax law, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved