A Few Tips for Balancing Value, Equity & Debt in a Like-Kind Exchange

In a 1031 exchange, it’s important to balance your value, equity, and debt. Some taxpayers assume that all they need to do is reinvest the equity from their relinquished property into their replacement property. These taxpayers are not thinking about their need to continue their investment into properties of equivalent or greater value, equity, and debt.

It’s important to remember that the first dollars off the table are the profit dollars and the last dollars off the table are the return of your original basis. If you are going to take some boot (non-1031 proceeds), it can be reflected on the settlement statement, but know that those first dollars off the table are all going to be taxable.

Taxpayers should have their CPA or tax accountant on speed dial before the sale of the relinquished property and the purchase to review the settlement statements. If you drop your closing statement in your accountant’s lap on April 15th of the following year there’s not much they can do to change how the settlement statement was prepared. The time to do that is before the closing date.

Call Now to Start Your 1031 Exchange of Real Estate

1031 exchanges are excellent vehicles for deferring tax and building wealth over time. If you own qualifying real property, you may be able to avail yourself of the benefits of a 1031 exchange. Talk to a qualified intermediary about whether or not your property is a good match for 1031 exchange treatment. Give our 1031 exchange intermediaries a call at our downtown Minneapolis office today to set up a time to chat about the specifics of your next 1031 exchange of real estate.

  • 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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