We recently worked with a married couple on their 1031 exchange who were selling depreciated properties (two duplexes) in Minneapolis that they’ve held for over twenty years. The couple wanted to exchange these properties in a 1031 like-kind transaction. The husband wanted to buy new property in Hawaii, while the wife wanted to buy a new property in Florida. Their plan was to initially use this new property for investment or business purposes. Long-term, however, their goals may change and they may wish to transform that property to personal use (after a substantial period of using it for investment or business).
Challenges in a Hot Seller’s Market
The biggest challenge that this couple faced was that both real estate markets in Hawaii and Florida are currently hot. In any 1031 exchange, it’s really important to try and find your replacement property early in the process. That way, when you sell your appreciated relinquished property, you’ve got a sure thing. If you wait until late into the 45 day identification period, you might be stuck without a chair to land on.
Important 1031 Exchange Deadlines
When you sell your relinquished property, you have two important deadlines. The first deadline is the 45-day identification period in which you must make a written designation clearly describing your replacement properties. The other deadline is the 180 day exchange period in which you have to close on your property and receive the title to the property. 1031 exchanges are all about exchanging real property for other real property. These deadlines constrain and limit the process.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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