In this 1031 FAQ video, Jeff Peterson talks about 1031 exchanges in the state of Minnesota and comports with the federal standard. Watch more 1031 educational videos here.
In the state of Minnesota we're very fortunate in that the state pretty much conforms exactly with the federal standard. So if you defer your gain for federal tax purposes you also defer your gain at the state level.
Other states differ from the federal standard. For example, Pennsylvania does not recognize non-simultaneous 1031 exchanges. And if you do a sale of property in Pennsylvania, though you may defer the gain at the federal level you do not get the same deferral at the state level.
The thing about states is that they can differ from the federal standard and they can be more aggressive than the feds in searching out to make sure that they get paid the amount of tax that they're due.
In California for example if you sell a relinquished property there, each year after you have to file a tax return with the state of California to let them know if you’ve subsequently sold your replacement property, because when and if you ever do recognize the gain on the sale of your replacement property they want to collect their state tax at that time when you finally do recognize the gain. If you have questions about state taxation give us a call so that we can talk through the specifics of your situation.
- 1031 Hotline: If you have questions about state vs federal exchange rules, feel free to call me at 612-643-1031.
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