Receiving any taxable boot during the 1031 exchange process can completely derail your like-kind exchange. In this article, we are going to walk through three pro tips for dealing with boot in a 1031 exchange of real estate.
Watch for Prorated Taxes, Rents & Security Deposits
Keep an eye out for prorated taxes, rents, or security deposits charged back at closing. These can created unintended boot. Have your tax advisor review your settlement statement before you close on your property.
Do The “Boot Test”
Use the “Boot Test” – if your replacement property value and debt assumed is greater than or equal to your relinquished property value and debt paid off, then you are probably safe.
Keep Your Hands Off the Proceeds
Never touch the proceeds yourself. The moment you (or your agent) have access to the funds, it is considered constructive receipt and your 1031 exchange will fail.
Like-Kind Exchange Company in Minnesota
Don’t let boot catch you off guard in a 1031 exchange. Even small details can turn your tax-deferred exchange into a taxable event. Partner with a qualified intermediary who keeps every dollar segregated and compliant.
If you’ve been searching for a like-kind exchange company in Minnesota, you’re in the right place! CPEC1031, LLC is a Minneapolis-based like-kind exchange company with more than two decades of experience in the 1031 exchange industry. We have a skilled team of qualified intermediaries standing by to walk you through the specifics of your next 1031 exchange. Whether you’re doing a forward exchange, reverse exchange, construction exchange, or something more complex – we’ve got the knowledge and expertise to make sure you are able to defer 100% of your capital gains taxes.
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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