What “Like-Kind” Means in 2018

2018 has brought changes to the 1031 exchange industry – with the implementation of the Tax Cuts & Jobs Act in January. In this article, we are going to talk about what exactly “like-kind” means in 2018.

Defining Like-Kind

“Like-Kind” is one of the most important terms in a 1031 exchange. All property involved in a given 1031 exchange has to be like-kind. In other words, your relinquished property and your replacement property both need to be similar in disposition to one another. Thankfully, the definition of like-kind real estate is very broad – with most real property considered like-kind to most other real property.

The biggest change to “like-kind” in 2018 is in the realm of personal property. Historically, the definition of like-kind personal property has been much more strict than that of real property. However, the Tax Cuts & Jobs Act effectively axed personal property from 1031 treatment. As a result, personal property is not eligible for 1031 treatment and no personal property is considered “like-kind” for 1031 purposes.

Tax Deferral with Section 1031

Looking to sell real estate but don’t want to shoulder the burden of the associated capital gains taxes? A 1031 exchange of real property can help you achieve these goals of tax deferral. When you’re embarking on a 1031 exchange, make sure you work with a qualified intermediary with experience. At Commercial Partners Exchange Company, we have over twenty years of experience facilitating all types of like-kind exchanges. We bring that experience to every transaction we facilitate so you can feel comfortable that you are in good hands. Contact us today at our Minneapolis office to speak with an intermediary about your transaction.

•  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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Exchange: Can I Sell Investment Real Estate & Buy Precious Metals?

This is perhaps the most common question we get regarding 1031 exchanges. With the passage of the Tax Cuts & Jobs Act, only real property can now be exchanged for other like-kind real property.

Here is the specific text from section 1031 itself:

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.

Commercial Partners in Minneapolis, MN

At Commercial Partners, we have been providing like-kind exchange services to clients throughout the Twin Cities and greater Minnesota for decades. Our qualified intermediaries can help you throughout the entirety of your 1031 exchange. We can advise you on replacement property, prepare your 1031 exchange documents, and answer all of your questions along the way. Contact us today to learn more about the services we offer and how we can help you defer taxes on your next real estate transaction.

• 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Do all States Recognize 1031 Exchanges?

1031 exchanges can be used by any United States taxpayer on property within the United States. However, certain states handle the taxation of 1031 exchanges differently than others. In this article, we are going to talk about the different 1031 exchange treatments that exist in some states.

Federal Tax Code

First of all, it is important to note that section 1031 is a part of the federal tax code. That being said, not all states in the union treat 1031 exchanges the same as the federal government.

California Claw-Back

California is one such state that treats 1031 exchange taxation a little bit differently than other states.

When you do a 1031 exchange, you defer your capital gains taxes on the transaction. You can do this as many times as you want, but if and when you decide to cash out and sell your final property you are subject to capital gains taxes on that sale. In most states, the taxpayer pays these taxes in the state where they sell their final property. In California, the taxpayer is subject to capital gains accrued on California property, even if that taxpayer has since sold their California property and exchanged into property in a different state. This is known as the California “Claw-Back Provision”

If you have any specific questions regarding your exchange and how various state laws may impact it, don’t hesitate to reach out to a qualified intermediary for answers!

Exchange Your Real Property

At Commercial Partners Exchange Company, it is our goal to help each and every client through the 1031 exchange process as seamlessly as possible. Our qualified intermediaries have over two decades of experience working with clients in Minnesota and across the United States on their exchanges of real estate. Contact us today to learn more about our like-kind exchange services and get started with one of our intermediaries now. Our main office is located in downtown Minneapolis, but we work with clients all over 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Does a 1031 Exchange Come with any Strings Attached?

A 1031 exchange allows you to defer your capital gains taxes when selling real estate and keep your hard-earned money working for you in a continued investment. That all sounds great, but the first question many people ask is - “What’s the catch?” In this article, we are going to talk about whether or not a 1031 exchange comes with any strings attached.

You’re Deferring Taxes, Not Making them Disappear

A common misconception surrounding 1031 exchanges is that they allow taxpayers to make their capital gains taxes disappear when selling real estate. In reality, you are only deferring these taxes until a later date (i.e. when you decide to sell your replacement property and “cash out”). A like-kind exchange is still a very beneficial tool for taxpayers to save money, but it’s important to understand that you are not completely eliminating your tax burden.

Rules & Regulations

There are also many rules and regulations that you need to abide by in order for your exchange to be recognized as valid by the IRS. You’ve got to be sure to hit your 1031 deadlines, and remember to identify your replacement property in writing.

Let’s Chat!

The qualified intermediaries at CPEC1031 (Commercial Partners Exchange Company) work tirelessly to facilitate real estate exchanges for taxpayers all over the United States. If you’re interested in learning more about the tax-saving benefits of a 1031 exchange, don’t hesitate to reach out to our intermediaries today to set up a time to chat. You can find us at our main office in downtown Minneapolis, or at one of our satellite offices around 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

What’s the Difference Between Deferring & Avoiding Taxes?

When some people discuss the benefits of 1031 exchanges, they highlight how a 1031 exchange can help you “avoid” taxes. What they really mean is that 1031 exchanges can help you “defer” taxes. In this article, we are going to talk about the difference between tax deferral and tax avoidance.

Tax Avoidance

Put simply, avoiding taxes is illegal. The term “tax avoidance” implies that the taxpayer is actively working to avoid paying the taxes that they owe. This is different from the tax deferral benefits of a 1031 exchange. With tax deferral, you are simply postponing your tax payment until a later point in time – in this case, whenever you decide to sell your replacement property.

Tax Deferral

Tax deferral, on the other hand, is perfectly legal under the right circumstances – such as a 1031 exchange. A like-kind exchange allows you to defer (not avoid) your capital gains taxes when selling real estate. The difference is that you are deferring your taxes until a later date (if/when you decide to sell your replacement property), rather than avoiding them completely.

Start a Like-Kind Exchange Now

If you’re looking to start a like-kind exchange, reach out to our qualified intermediaries today! At Commercial Partners Exchange Company, we have two decades of experience helping clients through their 1031 exchanges. Our primary office is located in downtown Minneapolis, but we work with clients throughout the state of Minnesota and all around the United States. Contact us today to learn more about our 1031 exchange services and start your like-kind exchange now!

•  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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved