Accounting Tips for a 1031 Exchange

1031 Exchange Accounting Tips

There are many rules to keep in mind when it comes to 1031 exchanges of real property. In this article, we are going to offer up a few accounting tips to keep in mind for your next 1031 exchange of real estate.

3 Baseline Requirements

In terms of accounting, there are three baseline requirements you must satisfy in your 1031 exchange:

  • Value. Your replacement property needs to be of equal or greater value compared to your relinquished property in order to cover all of your gain.
  • Equity. All of your sales proceeds (equity) from the sale of your relinquished property need to be reinvested into your replacement property.
  • Debt. You need to offset any debt relief with new debt to make sure that evens out. You can also invest additional cash to offset debt relief.

It’s also important to avoid seller-backed financing in a 1031 exchange. Such financing can trigger boot – which will be subject to capital gains tax. A qualified intermediary can help you navigate all of these rules and insulate you from receiving any gains or boot.

Exchanging into 1031 Property

At Commercial Partners Exchange Company, we have over two decades of experience helping individuals exchange their property in 1031 transactions. We can walk you through all the steps in your exchange – from the sale of your relinquished property to the acquisition of your replacement property. Give us a call today to speak with one of our 1031 exchange intermediaries and get your like-kind exchange in the works! Our primary office is located in downtown Minneapolis, but we have offices around 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.


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