Video – What is Not Considered Like-Kind in a 1031 Exchange?

When you’re thinking about doing a 1031 exchange, there are two parts to the initial litmus test that you must satisfy:

1. The exchange must be for like-kind property.

2. The property involved must be held for a qualifying purpose.

Like-kind generally is very broad. Real estate is generally considered like-kind to other real estate. You can exchange the Empire State Building for a condominium in Naples, FL.

But what are some situations in which real estate may not be considered like-kind?

• Leasehold estates of less than 30 years are not considered like-kind in the realm of 1031. This comes up when dealing with hangars at municipal airports, which are typically on 10 year leases.

• Additionally, certain oil and gas rights are like-kind and some are not. You might need to hire a tax attorney to give you an opinion on whether your specific oil and gas interests qualify for 1031.

Work with a Qualified Intermediary on Your Next Like-Kind Exchange

Work with a qualified intermediary from CPEC1031, LLC on your next like-kind exchange of investment real property. Our team has been facilitating 1031 exchanges across the United States for decades. We can help you with your forward exchange, reverse exchange, or build-to-suit construction exchange. Reach out to us today at our Twin Cities office (located in downtown Minneapolis) to learn more about the tax saving power of section 1031 and see if your property qualifies. Our intermediaries are standing by to discuss your situation.

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

RSVP For a Free 1031 Exchange Event - Growing and Improving your Real Estate Portfolio with 1031 Exchanges

Welcome to the Strategies For Growing and Improving your Real Estate Portfolio with 1031 Exchanges event! Join us at Redstone American Grill for an informative session on maximizing your real estate investments through 1031 exchanges. Learn from expert in the field, Jeff Peterson, and network with fellow investors & Realtors. Whether you're a seasoned pro or just starting out, this event will provide valuable insights to help you defer tax and leverage your current real estate portfolio. Don't miss this opportunity to expand your portfolio and take your investments to the next level!

Event Details

• Date: Tuesday, December 9, 2025

• Time: 5:45 PM – 8:00 PM

• Location: Redstone American Grill. 12241 Wayzata Boulevard, Minnetonka, MN 55305

Find A Qualified Intermediary For Your Next Exchange

Find a skilled qualified intermediary to help with your next 1031 exchange of real estate. At CPEC1031, LLC our team is ready and able to help you through all the ins and outs of the like-kind exchange process. We can help ensure that you meet all the benchmarks outlined in section 1031, and that you ultimately defer 100% of your capital gains tax burden. With decades of experience, we have the knowledge and expertise needed to facilitate your next 1031 exchange. Contact us today at our Twin Cities office to learn more 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Register Now - 1031 Exchange: From the Basics to the Complex in Real Estate Transactions

Presented by Jeffrey Peterson, President of CPEC1031

This program provides professionals with an understanding of I.R.C. Section 1031 Exchange rules, including foundational principles, real-world applications, and complex structuring scenarios. Topics include tax deferral theory, identification rules, related-party issues, drop & swap structures, and reverse exchanges.

At the end of the session, attendees will be able to:

• Explain the key principles and historical context of I.R.C. Section 1031 exchanges

• Identify the requirements for valid like-kind property and proper transaction structuring

• Recognize timing rules, disqualifying situations, and common pitfalls

• Understand complex strategies including reverse exchanges and drop & swap scenarios

2 hours of MN Real Estate CE applied for. 

Event Details

• Date: Thursday, December 11, 2025

• Time: 11:30 AM – 1:30 PM

• Location: The Shops at West End Community Room. 1621 West End Blvd, St. Louis Park, MN 55416

This is a lunch and learn event. Lunch will be provided. Please check in 15 minutes prior to the event to grab your lunch and be ready to learn. 

The 45-Day Countdown – Identification Rules in a 1031 Exchange

You sold your property in a 1031 exchange and now the clock is ticking! You have only 45 days to identify your replacement property. That countdown starts the day after your relinquished property closes (the closing date is day 0). There are no extensions or exceptions (except in the case of some federally declared disasters). It’s important to remember that weekends and holidays count too.

3 Identification Rules in a 1031 Exchange

1. 3-Property Rule. You may identify up to three properties and there is no value limit. You can purchase one, two, or all three properties within 180 days.

2. 200% Rule. Identify any number of properties as long as their total value does not exceed 200% of what you sold. For example, if you sold $1 million, you can identify up to $2 million in total value.

3. 95% Rule. If you go over both the 3-property and the 200% limits, you must acquire at least 95% of the total value identified. This rule is rarely used, but it can save a complex 1031 exchange.

How to Identify Your Property

Now that you know the identification rules, how do you go about actually identifying your property in a 1031 exchange?

• In writing on the Replacement Property Identification Form, signed by you, and delivered to your Qualified Intermediary.

• After Day 45, you cannot add or subtract properties.

• If a deal falls through, or if a property is not on your list, it is too late.

• After the sale date, you must complete the purchases within 180 days or before your tax return is due, whichever comes first.

Pro Tips for a Successful 1031 Exchange

• Plan ahead and consult with your tax advisor, CPA, and your Qualified Intermediary.

• Confirm your written notice (Replacement Property Identification Form) is received on time to your Qualified Intermediary.

• Consider identifying “in the alternative” by listing Property A or B, not both.

• Lock up a replacement property early by getting it under contract for purchase, or purchasing the property in a reverse exchange.

CPEC1031, LLC – Your Go-To Resource for 1031 Exchanges

At CPEC1031, LLC we are your go-to resource for all things related to 1031 exchanges. With more than two decades of experience under our belts, we have the knowledge needed to guide you through the complicated web of your 1031 exchange and ensure you are able to defer all of your capital gains taxes when it comes time to close on your replacement property. Give us a call today to learn more about the many benefits of section 1031 of the Internal Revenue Code and see if your property qualifies for like-kind exchange tax deferral.

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

One Mistake that Can Sink Your 1031 Exchange: Constructive Receipt (“Taking Boot”)

When it comes to completing a successful 1031 exchange, few mistakes are as costly, or as common, as accidentally triggering constructive receipt. Investors sometimes call this “taking boot,” but whatever the label, the result is the same: your tax deferral may be jeopardized.

What Is Constructive Receipt?

Constructive receipt occurs when the IRS determines you had actual or potential control over your exchange proceeds. You do not have to physically cash a check or deposit money into your account for it to count. Even brief or indirect access to funds can trigger constructive receipt in the eyes of the IRS. And, if the funds are available to you in any way, even for a short time, the exchange is likely “off the table.”

For example:

• If your sales proceeds are wired to your personal account, even for a day, you have taken actual receipt.

• If the check from closing is made payable to you, you have taken constructive receipt.

• If you instruct the closing agent to hold the funds “until you decide what to do,” that too can be seen as constructive receipt.

• Having the funds held by your agent, your employee, or a relative can be construed as constructive receipt.

How “Boot” Fits into the Picture

The term “boot” refers to any cash or non-like-kind property you receive during a 1031 exchange. Boot is taxable in the year of the exchange, even if the rest of the transaction qualifies for deferral.

This means:

• Taking all proceeds in boot = no valid exchange.

• Taking some proceeds in boot = partial exchange. You may defer tax on the reinvested portion but owe tax on the boot.

It is easy to see why constructive receipt and boot get conflated. In both situations, the investor winds up with taxable money in hand.

How to Avoid Constructive Receipt

The good news? Avoiding constructive receipt is straightforward if you plan ahead. The IRS requires that exchange funds be placed in the hands of a Qualified Intermediary (QI), not the taxpayer.

Here is what that looks like in practice:

1. At closing, your sales proceeds are wired directly to your QI, never to you.

2. The QI safeguards the funds during your identification and exchange period (preferably through a separate, segregated bank escrow account.)

3. When you close on your replacement property, the QI wires the funds directly into that purchase.

By keeping your funds out of reach, the QI eliminates constructive receipt and ensures your exchange complies with IRS safe-harbor rules.

Why This Matters

Receiving funds can be an innocent mistake. For example, a poorly worded instruction at closing, or a misunderstanding of the rules could result in receipt. But the consequences are serious. Once receipt occurs, the exchange may be disqualified. Unfortunately, there is no reset button.

Find Out if a 1031 Exchange is Right for You

Find out if a 1031 exchange is right for you by contacting the qualified intermediaries at CPEC1031, LLC today. Our team has over twenty years of experience working on 1031 exchanges of all shapes and sizes. We have the skills and expertise needed to make you feel comfortable and confident throughout the exchange process. Contact us today to learn more about the like-kind exchange process and see if your property qualifies for 1031 exchange treatment under the Internal Revenue Code.

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved