Should You Be Worried About 1031 Exchanges Being Capped or Eliminated?

Section 1031 is always a potential sacrificial lamb in the eyes of many politicians from both sides of the aisle. It was republicans that restricted 1031 exchanges in 2018 and nearly wiped out the industry. Additionally, the Biden and Obama budgets have proposed to cap or eliminate section 1031. It’s really a bipartisan issue.

1031 exchanges are viewed as a “pay for” but that view is based on flawed logic. If you own a property and have a ton of potential gains, you’re going to be slapped on the wrist by the taxman if you sell that property outright. If section 1031 did not exist, many people in this situation would simply never sell their property and choose to avoid the tax hit. Reducing or eliminating 1031 exchanges would effectively lock people into their properties and stymy the economy. When you have less velocity in the marketplace and fewer buyers, property values decrease.

Politicians who advocate for taking away section 1031 are not considering this lock-in effect. They won’t collect the tax revenue that they anticipate because sales will sharply decline. 1031 exchanges are propping up and encouraging more employment and economic growth. 1031 exchanges have been doing this since 1921 and they continue to do the same today.

1031 Exchange Help When You Need it Most

At CPEC1031, LLC our business is facilitating like-kind exchanges under section 1031 of the Internal Revenue Code. The 1031 exchange process can be complicated and confusing. But you don’t need to go it alone! A qualified intermediary can be your guide throughout the course of your 1031 exchange. The qualified intermediaries at CPEC1031, LLC have over twenty years of experience working with taxpayers just like you. No matter where you are in the 1031 exchange process, we are here to help. Reach out today to set up a time to discuss 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

In a 1031 Exchange, Do the Titles of the Relinquished & Replacement Properties Have to be in the Same Name or Entity?

Many people think that, in a 1031 exchange, you need to use the exact entity for both the relinquished property and the replacement property. However, that’s not always the case.

The bottom line is that the same taxpayer needs to be the one selling and purchasing all property in a 1031 exchange. That said, the properties do not have to be titled identically. It could be the taxpayer acting between and through a trust or LLC or something else.

Every US taxpayer is an individual with a social security number. If you want to buy property in your revocable trust, that’s probably considered you as well because revokable trusts are not separate and distinct taxpayers. If you want to buy property in your own single-member LLC that’s disregarded for tax purposes (everything rolls up to your schedule E on your personal tax return), that’s still considered you for 1031 exchange purposes.

Qualified Intermediaries who can Help with Your Like-Kind Exchange

At CPEC1031, LLC our qualified intermediaries can help set up and execute your like-kind exchange of real estate. We have more than twenty years of experience assisting taxpayers across the country with real estate exchanges under section 1031 of the Internal Revenue Code. Let our team of professionals help you through all the details of your next like-kind exchange of investment real estate. Contact us today at our Minneapolis office to learn more about the benefits of the 1031 exchange and see if your property is a good fit for a like-kind 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

How to Handle 1031 Exchanges Involving Partnerships

Partnerships are great for buying and owning property. But partnerships can be awful when you want to sell property.

If you’re in a partnership and are thinking about selling property in a 1031 exchange, it might be a good idea to reconfigure the ownership into a tenancy-in-common before even listing the property for sale. That breaks everyone out into separate ownership. It’s also a good idea to negotiate with your bank at the very beginning of the process that they will consent to their collateral being reconfigured into a different ownership structure.

If a partnership owns a piece of property it is the entity that’s the most qualified to conduct the exchange. If everyone in the partnership votes unanimously that they’ll stay together and do the exchange at the entity level, then things will be fine. But quite often, it’s not that simple and partners want different things. This is why it’s important to consult with a real estate attorney early in the process to discuss the available options for splitting up the property in a way that will benefit everyone involved.

Make a Plan for Your Next 1031 Exchange

Make a plan for your next 1031 exchange of real estate by contacting the qualified intermediaries at CPEC1031, LLC. Our team has more than twenty years of experience facilitating exchanges that run the gamut from small and simple to big and complex. We can put our experience to work for you by helping you defer your capital gains taxes on the sale of investment real estate in a 1031 exchange transaction. Contact our team today to learn more about the benefits of section 1031 and how you can get started with the process.

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

The Many Motivations for Doing a 1031 Exchange

There are many different motivations for doing a 1031 exchange of real estate. One motivation that we often see in the Minneapolis area is what we call “grumpy goats.” These are people who are fed up with various things (high tax rates, insurance, local regulations and restrictions, tenants, etc.) and want to try out owning real estate in a different area. So they sell their relinquished property but they don’t want to get slapped with the taxes so they do a 1031 exchange.

The first thing that you have to do in this situation is talk to a qualified intermediary. If you sell your property and leave the closing table with your proceeds in hand, you’ve got the recognition of gain and cannot do a 1031 exchange. It’s important to engage with a qualified intermediary before you start the process.

Exchange Your Investment Property in a 1031 Transaction

Exchange your qualifying investment property in a 1031 transaction and realize the tax-saving benefits of the like-kind exchange. Reach out to the tax-deferral professionals at CPEC1031, LLC today to learn more about the 1031 exchange process. Our qualified intermediaries have over twenty years of experience working on exchanges of all types in Minnesota and across the United States. We can help guide you through the process of your 1031 exchange and make sure you leave no stone unturned. Find us at our downtown Minneapolis offices, where are ready and waiting to help you through the details of your 1031 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

Explaining the 3 Property and 200% Rules for 1031 Identification

In a 1031 exchange, the qualified intermediary acts as an insulator by temporarily taking possession of the sales proceeds and, under a contract, utilizing that money to purchase replacement property as a continued investment.

That property needs to be identified clearly and unambiguously within 45 days after the closing of your relinquished property. The most common identification rule is the “three property rule,” under which you can identify any three like-kind properties. For example, in Minneapolis you could identify the IDS Center, the Foshay Tower, and the Wells Fargo Center. These are three incredibly expensive pieces of property, but that doesn’t matter for 1031 exchange purposes. Under the three property rule you can identify three or fewer properties – regardless of how expensive they are.

An alternative 1031 identification rule is the “200% Rule.” Under that rule, you are allowed to designate more properties so long as the total value of the properties you identify cannot exceed twice the value of what you relinquished. Let’s say you sold a property for $1 million. Under the 200% rule, you could identify up to $2 million worth of replacement property – regardless of the total number of properties identified.

Discover the Benefits of the 1031 Exchange

Any United States taxpayer can utilize a 1031 exchange to defer capital gains taxes on the sale of qualifying investment real estate. Realize the tax-saving benefits of section 1031 by discussing the process with a qualified intermediary. At CPEC1031, LLC our intermediaries have decades of experience facilitating like-kind exchanges under section 1031 of the Internal Revenue Code. Our intermediaries can work with you throughout the entire process – answering all of your questions and clearing up any confusion along the way. Contact us today to set up a time to chat with our team of 1031 intermediaries.

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved