1031 Exchanges & Recaptured Depreciation

When you own real estate and make improvements to it, you can take a deduction on your tax return for the theoretical wear-and-tear on the property. This is one of the great benefits of owning real estate. In this article, we are going to talk about recaptured depreciation and 1031 exchanges.

Residential vs. Commercial Property

Residential rental property is depreciated over 27.5 years, and commercial property is depreciated over 39 years. That means that even if your property increases in value, you can take a deduction for the wear-and-tear on the property.

However, the disadvantage is that your basis is reduced incrementally each year. If you own an apartment building for 27 years, your property will have a zero basis on the improvements because you have run out the clock on your depreciation.

When you go to sell your property, all of your depreciation related gain is taxed at a higher rate than standard capital gains tax rates. Thankfully, you can do a 1031 exchange and defer all of those capital gains taxes.

1031 Exchange Professionals

Considering deferring taxes with a 1031 exchange? Be sure to consult with a 1031 exchange professional about the details of your exchange before you start the process. At CPEC1031, our intermediaries have over twenty years of experience facilitating exchanges of real estate. With offices located in downtown Minneapolis and around the country, we are well equipped to help you with your 1031 exchange no matter where your property is located. Contact us today to set up a time to speak with one of our 1031 exchange professionals about your transaction.

• 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

When to Involve a Qualified Intermediary in Your 1031 Exchange

Recently, a client came to us with the following question:

"We have the property to be relinquished on the market and I am in the final steps to get the property I will be buying under contract. Do I need to send anything to the qualified intermediary before I sign the purchase agreement on the new property?"

Involving a Qualified Intermediary

Good question! No, the intermediary does not need anything prior to your signing the purchase agreements. Intermediaries typically get involved once a purchase agreements is signed and the title process is getting started (prior to closing).

Once you have them, send a PDF copy of the signed purchase agreements and customer application form completed (to the extent possible) to your intermediary to get started with the 1031 exchange process. You may also want to include our sample text into your purchase agreements, and let your title-closers know that you are doing a 1031 exchange.

Exchange Your Property

CPEC1031 works with taxpayers large and small on the exchanging of real estate under section 1031 of the Internal Revenue Code. With twenty years of experience under our belts, we can answer all of your questions, advise you on replacement properties, and prepare all of your needed documentation throughout the course of your exchange. Reach out to us today to learn more about our 1031 exchange services and get your exchange off the ground today. Our office is located in downtown Minneapolis, but we work with clients across the United States.

• 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

What to do When Your 1031 Exchange Fails

Despite the best preparation – 1031 exchanges sometimes fail. But there are options for salvaging what’s left of your exchange. In this article, we are going to discuss some options for what to do when your 1031 exchange of real estate fails.

What Happens When a 1031 Exchange Fails?

First off, what do we mean when we say “failed” 1031 exchange? A failed 1031 exchange is an exchange in which the taxpayer is not able to defer their capital gains taxes on the sale. Failed exchanges can be caused by a number of factors, including:

• Constructive receipt of taxable boot by the taxpayer conducting the exchange

• Failure to complete the exchange process within the 180 day time period

• Failure to abide by the property identification rules, qualifying purpose rules, or any other guidelines set out by the IRS for 1031 exchanges.

1031 Exchange Companies

At CPEC1031, we have over two decades of experience working with clients in all different business sectors on their 1031 exchanges of real estate. With the level of experience, we bring to the table, you can rest assured that your exchange is in good hands. We can help you organize all the elements of your exchange, including your documentation and replacement properties. Contact us today at our downtown Minneapolis office to set up a time to chat about your exchange with one of our intermediaries.

• 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Exchanging Apartment Buildings

Taxpayers and investors can exchange out of and into a wide variety of different property types. In this article, we are going to discuss 1031 exchanges of apartment buildings.

What Type of Property Suits You?

When considering investing in real estate, think about the type of property that’s right for you. Apartment buildings can be a great source of continuous revenue – with rent being paid monthly. However, be aware that apartment buildings can be management intensive compared to other properties. You need to deal with tenants, fix any maintenance issues that arise, and more. If you’re reaching retirement age, you may not want to have to deal with all these issues. In that case, it might be in your best interest to exchange into a less management intensive property.

Exchanging Up

Whatever property you choose, you should always consider a 1031 exchange to defer your capital gains taxes. Like-kind exchanges allow you to exchange up into a bigger and better property. That could mean exchanging from a duplex to a fourplex, or from an apartment complex into a restaurant. In any case, you can avoid a hefty capital gains tax bill by exchanging your property in a 1031 transaction.

Defer Taxes with Section 1031

Don’t get stuck with a huge tax bill when you sell your next piece of real property. Instead, defer your capital gains taxes with a 1031 exchange! With more than two decades of experience, CPEC1031 has the skills necessary to lead your exchange across the finish line. Our intermediaries are available to answer your questions and help you get started with your exchange today. Contact us at our downtown Minneapolis office to start the conversation.

• 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Restaurant Properties & the 1031 Exchange

When it comes to 1031 real estate exchanges, there are a lot of different types of properties that can be exchanged – from hotels to apartment buildings, to fast-food restaurants. This article is all about 1031 exchanging restaurant properties. We’ll discuss the benefits of doing a like-kind exchange on restaurant properties and how to start the process.

1031 Exchanging into a Restaurant

The restaurant business is tough, but if you do the required research and find a great location – restaurants can be a great real estate investment. 1031 exchanging into restaurant space takes that a step further – allowing you to defer your capital gains tax on the sale of your property.  

Exchanges Across Industries

1031 exchanges of real estate can be done across industry lines. That means you can sell an apartment building and exchange into a fast-food restaurant with a 1031 transaction. As long as your property is held for a qualifying purpose and your replacement property is greater than your relinquished property in terms of value, equity, and debt – then you are good to go! This offers a great opportunity to continue your investment into a bigger property and keep your money working for you over time.

Save Money with a 1031 Exchange

Start saving money today with a tax-deferred exchange of real estate! As a 1031 exchange service provider with more than twenty years of experience, our intermediaries have the tools needed to help you through every step of your 1031 exchange. From document preparation to replacement property advice, we’ve got you covered! Reach out to us today to set up a time to chat with our 1031 exchange intermediaries about the details of your exchange.

• 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved