If you are considering a 1031 exchange, you may have a number of questions about the best way to navigate the transaction. One common question that we receive when working with clients who are relatively new to a 1031 exchange is whether or not they can sell multiple properties during an exchange. We explain whether that is allowed, and how to ensure you conduct the exchange properly when relinquishing multiple properties.
Relinquishing Multiple Properties During A 1031 Exchange
While a typical 1031 exchange involves the exchange of a like-kind property for another, oftentimes a client will want to move on from multiple properties at the same time. As long as this exchange follows all of the rules and requirements, it is perfectly acceptable to relinquish multiple properties. You can also acquire multiple replacement properties and relinquish a singular property.
When exchanging multiple properties, there are some considerations that you’ll want to be aware of in order to ensure full tax deferral. You will want to ensure that the replacement property is worth as much or more than the combined value of relinquished properties #1 and #2. You’ll also need to apply all of the cash generated by the relinquishment of the two properties towards the acquisition of the replacement property. And finally, any debt that is resolved upon the transfer of relinquished properties #1 and #2 is replaced with new debt or new cash in the acquisition of the replacement property.
This may sound a bit complex, and to the inexperienced asset manager it certainly can be. Even those with years of experience would benefit from having the entire process streamlined by working with a Qualified Intermediary to ensure any asset exchange is handled correctly and within the Internal Revenue Code. An innocent mistake can prove costly, so put those fears to bed by working with a team that has facilitated countless 1031 exchanges over the past two decades. For help with your 1031 exchange, turn to the team at CPEC 1031. Give our team a call today at (612) 643-1031.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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