Things to Remember When Dealing with TIC Property

When a property is held in a partnership of LLC, it can get a little contentious between the partners when it comes time to sell. Some of the partners may want to sell the property outright, while others may prefer to do a 1031 exchange to avoid the associated capital gains taxes. Converting the ownership structure into tenancy-in-common is a great way to deal with this type of situation. In this article, we are going to discuss a few things to keep in mind when dealing with Tenancy-in-Common Property.

Prepare Accordingly

The first thing to remember with tenancy-in-common exchanges is to give yourself plenty of lead time. This is a good practice in any 1031 exchange, but especially when TIC property is involved. It’s important to make the switch to tenancy-in-common property as early as possible in the process. If you wait until the day before your exchange to convert, the IRS may not recognize your exchange.

Don’t Forget Your Holding Requirement

Your 1031 property needs to be held for investment purposes or for use in your trade or business. Be sure to hold onto the property for a sufficient time period before beginning your exchange.

1031 Exchanges of Tenancy-in-Common Property

When dealing with tenancy-in-common property, it is important to understand the ins and outs of the 1031 exchange process. At CPEC1031, our qualified intermediaries have more than two decades of experience working with clients in all industries on their real estate exchanges. We can work with you through every stage of your exchange – explaining the process and answering all of your questions along the way. Contact us today at our downtown Minneapolis offices to set up a time to chat with one of our intermediaries about 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

What is the Last Step in the 1031 Exchange Process?

We’ve talked a lot about the 1031 exchange process as well as the first step you need to take to begin your exchange. But what about the end of your exchange? In this article, we are going to talk about the last step in the 1031 exchange process.

Closing on the Replacement Property

The big final step in a 1031 exchange is the closing on the replacement property. During this process, you will move your net proceeds from the relinquished property into your new replacement property and defer your capital gains taxes in the process. After the closing is complete, don’t forget that you will need to report your exchange on your tax filing.

Beyond Your Exchange

Once your exchange is complete and you’ve successfully deferred your capital gains taxes, you can rest easy in the knowledge that you sold your property in the most tax-advantageous method possible. But don’t forget that 1031 exchanges allow you to defer your tax – which means you will still need to pay capital gains taxes if and when you sell your replacement property in the future. However, you can also opt to exchange that property and continue your tax saving if you so choose.

Finish Your 1031 Exchange

Finish your 1031 exchange and defer your capital gains taxes when selling real estate. The qualified intermediaries at CPEC1031 can help! Our intermediaries have two decades of experience facilitating exchanges throughout the United States. We have the knowledge and experience needed to ensure your exchange goes as smoothly as possible. Contact our 1031 exchange professionals today to get your exchange up and running!

• 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 Exchange Case Study: Farmland Exchanges

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

I have a farm for sale - bare land, no buildings - that I would like to do a 1031 Exchange on if/when it ever sells. Can I exchange into ANY other type of Real Estate? 

Tax Code Changes

Per recent tax code changes, US real property may be exchanged for other US real property. No personal property (non-real property) may be exchanged as a result tax reform.

Both the Relinquished Property and the Replacement Property must be held for a qualified purpose (either for productive use in a trade or business or for investment).

Section 1031 States:

No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.

IRS PUB 544 States:

There must be an exchange of like-kind property. Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. The exchange of real estate for real estate and the exchange of personal property for similar personal property are exchanges of like-kind property. For example, the trade of land improved with an apartment house for land improved with a store building, or a panel truck for a pickup truck, is a like-kind exchange.

IRS PUB 544 also States:

Real property. An exchange of city property for farm property, or improved property for unimproved property, is a like-kind exchange.

Indirect ownership of real property through an entity such as an ETF or REIT may not qualify, so talk to your CPA about this question. You should consult with your accountant about this because the rules are complex and may depend on how the transaction is set up.  Also, a DST or Delaware Statutory Trust may  be an option to consider as an alternative.

Minnesota 1031 Exchanges

At CPEC1031, our qualified intermediaries are proficient in all the complexities of section 1031. We can guide you through the process and ensure that your property meets all the necessary requirements for 1031 tax deferral. Give us a call today to talk about the details of your exchange with one of our qualified intermediaries. Our primary office is located in downtown Minneapolis, but we work with clients throughout the state of Minnesota, and 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

4 Tips for an Effective 1031 Exchange

Many taxpayers want to defer their capital gains taxes with a 1031 exchange, but don’t have a great concept of the rules that need to be met in a successful 1031 exchange. In this article, we are going to offer up several tips to avoid pitfalls and make sure your 1031 exchange is effective!

Before You Close, Sign Your Exchange Documents

Your exchange documents must be signed on or before the date that you sell your relinquished property. If you fail to sign these documents before selling your property, it’s too late to conduct an exchange.

Acquire the Replacement Property

The same taxpayer that sold the relinquished property needs to acquire the replacement property. Keep that in mind when setting up your exchange.

Be Careful with Expenses

There are a lot of potential pitfalls when it comes to paying expenses with exchange proceeds. In short, some expenses can be paid with the net proceeds, and others will result in taxable boot and only a partial 1031 exchange.

Make Security a Priority

Since this is a real estate transaction, it’s important to make sure your exchange funds are secured every step of the way. Make sure your intermediary is financially reputable.

Like-Kind Exchange Process Explained

If you’re confused about the like-kind exchange process, don’t hesitate to reach out to one of our 1031 exchange professionals. CPEC1031has been helping taxpayers throughout Minnesota and across the country with their exchanges for more than twenty years. We have the experience needed to ensure your exchange is successful. Contact us today to learn more about the exchange process and whether your property qualifies for capital gains tax deferral.

• 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

Why a Qualified Intermediary is Essential in a 1031 Exchange

Your qualified intermediary plays several crucial roles in a 1031 exchange. In this article, we are going to talk about why a qualified intermediary is an essential element in any 1031 exchange of real estate.

Documents

There are a lot of documents required in a 1031 exchange. Making sure you have all the required documentation can be daunting for the uninitiated. An intermediary can not only ensure that your documents are in order – they can draw them up for you!

Keeping Your Exchange Funds Separate

In a 1031 exchange, you need to keep your net proceeds separate at all times to avoid constructive receipt (which can trigger boot). The best method for doing this is to have your intermediary hold the exchange funds in a segregated bank account until you are ready to reinvest them into the replacement property.

Peace of Mind

Having a qualified intermediary by your side will also give you peace of mind. You can rest assured knowing that your exchange is in good hands and that all the necessary requirements are being met.

1031 Exchange Tax Deferral

Complete your 1031 exchange today to defer your capital gains taxes on the sale of real estate. Contact the qualified intermediaries at CPEC1031 for guidance through the like-kind exchange process. With more than two decades of experience, our intermediaries can answer any lingering questions you have, advise you on suitable replacement properties, and prepare your 1031 documents. Reach out to us today at our downtown Minneapolis office to set up a time to chat with a 1031 exchange professional.

• 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