Balance is an essential element in any 1031 exchange. An imbalance can result in only a partial exchange, or the complete failure of your property exchange. There are a several things you need to keep in mind so that your like-kind exchange remains balanced In this article, we are going to offer up some tips for balancing your 1031 exchange.
Reinvestment
First of all, you need to remember to reinvest all of the proceeds from your sale into your new replacement property. Many taxpayers feel tempted to pocket some of these proceeds, but any proceeds that you receive will result in boot that you will need to pay taxes on. Keep your hands off of these net proceeds and reinvest 100% of them into your replacement property.
Value Replacement
Make sure that your replacement property is of equal or greater value than your relinquished property. You always want to exchange up, not down.
Debt Replacement
Finally, you need to ensure that the debt you are taking on with your replacement property is equal to (or greater than) that of your relinquished property. If it is not, pay the difference in cash at the closing table.
Do a 1031 Exchange on Your Property
A 1031 exchange can be very beneficial from a tax point of view. It’s something you should always consider when selling investment real estate. Talking through your options with a qualified intermediary is a great way to wrap your head around the process and benefits of a 1031 exchange. At CPEC1031, LLC, our intermediaries have twenty years of experience in the 1031 exchange industry. We can walk you through every step of the 1031 exchange process. Give us a call today to learn more and chat with our team 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.
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