We talk a lot about how you generally want to avoid “cashing out” during a 1031 exchange, but are there any situations in which you can cash out? In this article, we are going to talk about when (if ever) you can cash out in a 1031 exchange.
Cashing Out
In general, you want to avoid cashing out at all costs in a 1031 exchange. When you receive cash during a 1031 exchange, that is considered taxable boot and would prevent you from deferring 100% of your capital gains tax (which is typically the primary reason for conducting a 1031 exchange). You certainly can cash out in a 1031 exchange, but in most cases, you wouldn’t want to.
However, there are some situations in which you may want to consider cashing out.
A Cash Out Strategy
A cash-out strategy involves refinancing your properties in the future or converting them to personal use after holding them for investment or business purposes, then selling them as your primary residence.
Alternatively, you can continually exchange properties through 1031 exchanges and eventually pass them to your heirs tax-free with a stepped-up basis when you die.
Find a Qualified Intermediary for Your Unique 1031 Exchange
Find a qualified intermediary who can handle the unique details of your next 1031 exchange by reaching out to CPEC1031, LLC. We have decades of experience facilitating like-kind exchanges under section 1031 of the Internal Revenue Code. Whether you’re doing a forward exchange, reverse exchange, construction exchange, or something more complex, we are here to help you defer your capital gains taxes. Reach out to our team of Twin Cities 1031 exchange professionals today at our Minneapolis office to learn more about the exchange process and see how we can help!
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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