There are a number of options at your disposal when concluding a 1031 exchange of real estate. In this article, we are going to discuss a couple of lesser utilized options to consider when choosing replacement property in a 1031 exchange.
Deferred Sales Trust
If the exchange fails or partially fails, rather than take back the unutilized/unspent 1031 funds in immediately taxable cash, you may receive back an installment note (in which at least one payment will be received by you after the tax year in which the Relinquished Property sale occurred) for the amount due from the qualified intermediary and then you may elect to be taxed on the installment method so you only have to include in your income each year the amount of gain on the payments (and any debt relief) that you actually receive.
Fail to Exchange
Have the exchange fail (or partially fail) and take back the unused 1031 funds, and pay your taxes on the amount of gain that is recognized. Note: You may be able to mitigate a failed (or partially failed) 1031 by purchasing certain oil and gas investments (that provide current intangible drilling costs deductions) which may be used to offset some or all of the recognized gain.
Like-Kind Exchange Resources
At CPEC1031 we offer support for taxpayers conducting like-kind exchanges in Minnesota and across the country. Our qualified intermediaries have two decades of experience facilitating exchanges of all types. We put this experience to work on all exchanges and can answer all of your questions, prepare all of your documentation, and help you find appropriate replacement property. Contact us today to learn more about our 1031 exchange services or to start the process of your exchange and start saving money in capital gains taxes today!
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.
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