3 Workarounds to Avoid Boot When Financing a 1031 Exchange with a Note

 Avoid Boot

Can you do a 1031 exchange and take back a note to finance the buyer’s purchase? That’s our topic for today’s article.

Workarounds

Receiving a note or contract for deed may trigger boot. Here are a few potential workarounds:

  • You can use a note and have the seller bring the loan money to the closing so the loan is not funded with the net proceeds from the sale. This way all of the funds can go directly into the 1031 exchange account.
  • You can run the note of contract for deed in favor of the qualified intermediary. This insulates the person doing the exchange from receiving any boot. Then, prior to closing on the replacement property, you can buy the note from the intermediary so there is cash in the 1031 exchange account.
  • If the replacement property seller is willing to accept the note as partial payment, it might be possible to allonge the note together with additional cash consideration.

1031 Real Estate Exchanges in Minnesota

Commercial Partners Exchange Company is one of the most experienced 1031 exchange companies in Minnesota – having just celebrated twenty years in business. Our team of qualified intermediaries helps clients across the country with their 1031 exchanges of real property. A 1031 exchange can save you a lot of money in capital gains taxes, and a qualified intermediary can make sure that you have all of your bases covered during your exchange. Contact us today at our downtown Minneapolis office and learn more about the tax-saving benefits of the 1031 exchange!

  • 1031 Hotline: If you have questions about boot in 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