How to Build Generational Wealth with a 1031 Exchange

One of the many benefits of a like-kind exchange under section 1031 of the Internal Revenue Code is that it allows you to compound your wealth over time. In this article, we are going to discuss how you can utilize the tax-saving benefits of a 1031 exchange to build generational wealth.

Build Generational Wealth Through Real Estate

Real estate is one of the most powerful tools for building long-term wealth. But capital gains taxes can take a significant bite out of your profits.

A 1031 exchange offers a smart solution to protect and grow your investments. With a 1031 exchange, you can:

  • Defer capital gains taxes and keep more of your money working for you

  • Reinvest in higher-performing properties without triggering a tax event

  • Transfer real estate to heirs with a stepped-up basis to minimize future tax burdens

By using a 1031 exchange, you keep your real estate investments compounding and growing — helping you build true generational wealth.

Start Your Tax-Saving 1031 Exchange Today

Begin the process of deferring your capital gains taxes with a 1031 exchange today by contacting the team at CPEC1031, LLC. Our qualified intermediaries have decades of experience facilitating forward and reverse exchanges under section 1031 of the Internal Revenue Code. We can take care of all your 1031 exchange needs and ensure you are able to defer 100% of your capital gains tax burden when selling qualifying real property. Contact us at our Twin Cities office to learn more about the like-kind exchange process, how it can benefit you, and how we can help!

  • 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

 

Identifying in the Alternative in a 1031 Exchange

If you’re afraid to identify your 1031 exchange replacement property because you don’t want your money to be tied up indefinitely, can you identify more than one replacement property even if you’re only planning to buy one of them?

The answer is yes. This is called “identifying in the alternative.”

How Does Identifying in the Alternative Work?

You identify property A or property B, but not both. For example, you could identify an apartment complex or a rental house, but not both of them.

If you are unsure which property will work out, identifying in the alternative can give you a backup plan without breaking the rules.

What are the rules?

  1. 3 Property Rule

  2. 200% Rule

  3. 95% Rule

Remember – all identifications must still follow IRS limits under the tax code.

The flexibility offered by identifying in the alternative can keep your 1031 exchange funds from being tied up while you wait on a deal you might not want to close.

Consult with your qualified intermediary and your tax advisor before you finalize your property list because in a 1031 exchange, flexibility and compliance go hand in hand.

1031 Exchange Services in Minnesota

At CPEC1031, LLC we offer 1031 exchange services to taxpayers conducting like-kind exchanges of real estate throughout Minnesota and across the country. There are many guidelines you must abide by during your 1031 exchange in order to defer 100% of your capital gains tax burden. A qualified intermediary (like those at CPEC1031, LLC) can help ensure that you meet all of these requirements. Let our team of intermediaries work with you through the details of your next 1031 exchange of real estate. Contact us today at our Minneapolis office to get started.

  • 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Video – How Does the Section 121 Exclusion Work?

Under section 121, there is an ownership test and a use test, and they don’t have to happen concurrently. For example, you may have rented and lived in a property for 24 months and then bought the property but moved out of and owned it for another 24 months. Your use and your ownership don’t have to be concurrent.

Section 121 applies to your primary residence. Your exclusion amount is $500,000 for married couples filing jointly ($250,000 for individuals) of profit under this provision.

Consider this scenario: you buy a property, live in it for a year, then rent it for three years, and subsequently return and live there for a year. As long as you make less than your exclusion amounts listed above, you won’t have any tax because you lived in the property as your primary residence for 24 months out of the previous five years.

Find the Right Qualified Intermediary for Your Next Like-Kind Exchange

A qualified intermediary can help you defer capital gains taxes with a like-kind exchange. However, it’s important to find the right intermediary for your particular exchange. Not all qualified intermediaries provide the same services or the same quality of services. At CPEC1031, LLC we are well-verse in all types of 1031 exchanges – from forward exchanges to reverse exchanges and everything in between. We have been working with clients on their 1031 exchanges for more than two decades. Give us a call today to discuss the intricate details of your unique 1031 exchange.

  • 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

How a 1031 Exchange Can Help You Work Smarter, Not Harder

If you own a management intensive property (like a duplex or apartment building) and want to get out of it, a 1031 exchange might be your ticket to working smarter, not harder. These types of management intensive properties bring all sorts of headaches like dealing with tenants, maintenance calls, and more.

If you find yourself in this position, you’ve worked hard to get there. But at a certain point, you need to start thinking about how you can make your wealth work for you and not the other way around.

With a 1031 exchange, you can transition from management intensive property to institutional-grade, management-free real estate and defer your capital gains tax burden in the process. Here are just a few of the benefits of exchanging into management-free real estate in a 1031 transaction:

  • You get the same real estate benefits without the management headaches

  • You preserve and grow your wealth over time while deferring capital gains tax

  • You can spend time enjoying life, rather than managing properties

Preserve your hard-earned equity by harnessing the power of the 1031 exchange!

Exchange Your Real Estate in a 1031 Transaction

In a 1031 exchange transaction, you can exchange your real estate for like-kind real estate and defer your capital gains taxes in the process. Section 1031 of the Internal Revenue Code is an extremely powerful tax provision that many taxpayers have been utilizing for decades. The good news is you can use it too! Section 1031 is available for any United States taxpayer to use. But you must ensure that you are following all the guidelines in order to defer your capital gains taxes. That’s where a qualified intermediary comes in. At CPEC1031, LLC our intermediaries can handle all the details of your exchange so you can rest easy.

  • 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Is a Cooperation Clause Necessary in a 1031 Exchange?

If you are considering a 1031 exchange, you may ask yourself if you need to include a cooperation clause in your purchase agreement. That’s a great question – read on to learn more about cooperation clauses in 1031 exchange transactions.

The Benefits of a Cooperation Clause

The short answer is that a cooperation clause in your purchase agreement is not mandatory, but it is a best practice in a 1031 exchange. Including a cooperation clause in your purchase agreement can save you time, money, and anxiety because it protects both sides of the deal.

If you are the seller in a 1031 exchange, a cooperation clause informs the buyer:

  • You are doing a 1031 exchange

  • Your rights will be assigned to a 1031 intermediary

  • The buyer will sign an acknowledgement that they have received notice of these intentions

On the flip side, if you are the buyer in a 1031 exchange, a cooperation clause informs the seller:

  • You are completing a 1031 exchange

  • Your rights will be assigned to a 1031 intermediary

  • The seller will have to cooperate with the 1031 exchange process and sign an acknowledgement that they have received notice of the buyer’s intention to conduct a 1031 exchange

Anyone Can Defer Taxes with a 1031 Exchange

Any United States taxpayer that owns qualifying real estate can conduct a 1031 exchange and defer their capital gains taxes on the sale. Section 1031 has been part of the tax code in one form or another for a hundred years. Take advantage of the tax saving benefits of section 1031 by contacting a qualified intermediary at CPEC1031, LLC to learn more about the like-kind exchange process and get started. We have more than twenty years of experience facilitating exchanges of real property across the country.

  • 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Defer the tax. MAXIMIZE your gain.

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