1031 Real Estate Exchanges Survive in the New Tax Bill

Since its inception, we’ve been monitoring the new tax bill (The Tax Cuts and Jobs Act) and its potential impact on section 1031 of the Internal Revenue Code. Now that the bill has passed and been signed into law (and officially took effect January 1, 2018), we’d like to offer a brief summation of its effects. In this article, we’ll provide an update on 1031 exchanges now that the new tax bill has been signed into law.

1031 Exchanges & the Qualified Intermediary

The biggest takeaway is that the new bill has preserved the 1031 exchange of real property and the role of the qualified intermediary in facilitating like-kind exchanges.

This bill is the first major tax code overhaul since 1986. It reduces many tax rates and redefines many rules and accounting methods. Thankfully, the bill keeps the 1031 exchange provision for real property.

However, not all 1031 exchanges were preserved with the passage of this bill. The legislation eliminates 1031 exchanges of personal property (aircraft, artwork, gold coins, and the like). This poses many questions for personal property investors who may currently be in the process of conducting a personal property exchange of like-kind property. It’s a good idea to contact your 1031 exchange professional to answer any of your questions about your exchange.

Qualified Intermediaries in Minneapolis

A qualified intermediary is perhaps the most important person you can have on your 1031 exchange team. Hiring an intermediary will ensure that you are insulated from receiving any taxable proceeds during your exchange. Furthermore, your intermediary will act as your advisor throughout the exchange – answering your questions, preparing your documents for closing, and more. At CPEC1031, we have decades of experience acting as qualified intermediaries for clients in Minnesota and throughout the country. Contact us today to speak with a QI about your like-kind exchange!

• Start Your Exchange: If you have questions about 1031 exchanges and the new tax bill, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Replacement Property Identification Requirements

When you’re conducting a 1031 exchange, you have 180 days total after the sale of your relinquished property to complete your exchange. The first 45 of those days are designated as your identification period. This is when you identify in writing all of your replacement properties. In this article, we are going to walk through some of the requirements for identifying replacement property in your 1031 exchange.

Identification in Writing

The most important requirement in the identification process is documenting your identification. Your replacement property identification needs to be made in writing. This means you need to compile the basic information about your replacement property (address, name, legal description, etc.) and send it to your qualified intermediary. It’s very important to document this process and confirm receipt with your qualified intermediary.

Start Early

Starting the identification process early is essential. Mistakes happen, and you want to make sure any errors that arise are addressed and resolved before the final day of your identification period. Working with your qualified intermediary before you even sell your relinquished property can give you a head start on the identification process.

1031 Exchange Company in MN

If you are searching for a company to facilitate your 1031 exchange of real property, look no further than CPEC1031. Our team of qualified intermediaries has been working with taxpayers throughout the country on their like-kind exchanges for decades. We have the knowledge and experience to ensure your exchange completes successfully. Contact us today at our downtown Minneapolis office to set up a time to chat with one of our 1031 exchange specialists.

• Start Your Exchange: If you have questions about 1031 identification requirements, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

What is a Partial 1031 Exchange?

Partial 1031 exchanges occur when the taxpayer doing the exchange recognizes some gain and is not able to fully defer their capital gains taxes. In this article, we are going to discuss partial 1031 exchanges – why they happen and how to best avoid them.

Partial 1031 Exchange

In an ideal 1031 exchange, you want to defer all of your capital gains taxes on the sale of your relinquished property by moving all of your net proceeds into the new replacement property. However, sometimes taxpayers only qualify for a partial 1031 exchange.

A partial 1031 exchange is an exchange in which the exchangor receives some like-kind property and also recognizes some taxable gain. This is often due to one or more of the following factors:

• Failure to receive adequately valued replacement property

• Receiving mortgage boot

• Receiving cash boot

You can avoid the recognition of gain and defer all of your capital gains taxes with enough foresight and strategy. Often, partial exchanges occur because taxpayers do not have a full grasp on the requirements of a 1031 exchange. Working with a qualified intermediary can remedy those issues.

1031 Exchange Qualified Intermediaries

1031 exchanges allow you to defer your gains taxes on the sale of real property, but in order to do so you need to satisfy a number of requirements. Work with a qualified intermediary on your exchange to make sure your exchange meets the necessary benchmarks. Your intermediary can work with you, advise you on properties, prepare the required documents, and walk you through the 1031 exchange process. At CPEC1031, our 1031 exchange accommodators have been working with clients on their 1031 exchanges for decades. Give us a call today to talk about your 1031 exchange!

• Start Your Exchange: If you have questions about partial 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

What is Mortgage Boot in a 1031 Exchange?

If you’re at all familiar with 1031 exchanges, you’ve likely heard the term “boot” before. Boot is something you want to avoid at all costs in order to complete a fully tax-deferred exchange of property. But boot comes in several forms. In this article, we are going to talk about mortgage boot and how to avoid it in a 1031 exchange of real estate.

Triggering Mortgage Boot

Mortgage boot occurs when the taxpayer doing the 1031 exchange is discharged of debt when they sell their relinquished property and the debt is not properly offset.

Avoiding Mortgage Boot

In order to effectively avoid mortgage boot and the trigger of gain in your 1031 exchange, you need to be sure that your discharged debt is offset by one of the following:

• New Debt (of equal or greater value) on the new replacement property.

• Cash contributed for the replacement property that’s equal to the amount of debt relief from the sale of the relinquished property.

1031 Exchange Services

If you are looking to defer your capital gains taxes on the sale of real estate, look no further than the 1031 exchange professionals at CPEC1031. Our qualified intermediaries have decades of experience in Minnesota and around the country with all types of exchanges – from forward to reverse. Having a qualified intermediary on your team is the best way to ensure your 1031 exchange completes as planned. Our intermediaries can draft your 1031 exchange documents, answer your questions, and advise you throughout the exchange process. Call today to chat with our MN qualified intermediaries about your exchange.

• Start Your Exchange: If you have questions about mortgage boot, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

What is a Simultaneous 1031 Exchange?

1031 like-kind exchanges come in several different forms. One particular type is called the simultaneous exchange. In this article, we are going to talk about simultaneous 1031 exchanges – what they are and when they can be useful.

Simultaneous 1031 Exchanges

A simultaneous exchange is a concurrent 1031 exchange in which a taxpayer disposes of their relinquished property and immediately acquires the new replacement property. This is also commonly referred to as a drop and swap exchange.

However, most 1031 exchanges are not structured as simultaneous exchanges, but rather as delayed exchanges. This is simply because most taxpayers are not able to line up the selling of their relinquished property and the purchase of their replacement property. A delayed exchange allows you to sell your relinquished property, and then acquire your new replacement property at some point over the following 180 days (the first 45 of which are set aside for identification of the new replacement property). This gives taxpayers a lot more flexibility, which is why it’s the preferred method for exchanging real estate under section 1031.

1031 Exchange Accommodator

At CPEC1031, our 1031 exchange accommodators have decades of experience helping taxpayers with their like-kind exchanges of real property. Whether you’re doing a forward exchange, a reverse exchange, or a build-to-suit construction exchange we have the knowledge and experience to walk you through the process and help you defer your capital gains taxes. With offices around the country, we facilitate 1031 exchanges across the United States. Contact us today at our Minneapolis office to set up an appointment with one of our qualified intermediaries.

• Start Your Exchange: If you have questions about simultaneous exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved