Video – Different Kinds of 1031 Exchanges

Forward Exchange

In a forward 1031 exchange, you sell your relinquished property first and you acquire the replacement property second. You can exchange into a single replacement property or multiple replacement properties.

Reverse Exchange

Another option is a reverse 1031 exchange, in which the intermediary acquires the replacement property and holds it for the benefit of the taxpayer. There are two different modalities of a reverse exchange:

1. The Back Leg Reverse Exchange. In this type of exchange, the qualified intermediary acquires the replacement property and holds it for the benefit of the taxpayer.

2. The Front Leg Reverse Exchange. If you can’t park the replacement property for some reason (for example, if your buyer flakes at the last minute), you can do a front leg reverse exchange. In this modality, the intermediary becomes the synthetic purchaser of your old relinquished property to liberate the taxpayer so they can acquire the replacement property.

The Build-to-Suit Exchange

In a build-to-suit 1031 exchange, you sell your relinquished property, put the sales proceeds with the intermediary, who then uses that money through an Exchange Accommodation Titleholder to buy the replacement land. Within the remaining 180 day exchange period, they construct improvements on the property. Let’s say you have a sale of $2 million and a purchase value of only $1.8 million. How do you resolve this $200K discrepancy? Have the intermediary erect improvements during the exchange period so when you receive the replacement property it’s worth at least $2 million.

Call CPEC1031, LLC Today

If you are interested in selling a piece of investment real estate but you don’t want to deal with the associated capital gains tax burden, then a 1031 exchange might be a good option for you! In a 1031 exchange, you can defer your capital gains taxes so long as you meet certain criteria. At CPEC1031, LLC we are here to help you through every step in the like-kind exchange process. We can prepare your documents, ensure you hit the 1031 exchange benchmarks, and answer all of your questions along the way. Get started with your 1031 exchange by giving us a call today!

• 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

Video – Potential Problems in a 1031 Exchange

In a 1031 exchange, you don’t want to buy down in value because then you aren’t continuing your investment into a property of equivalent or greater value.

You also want to avoid taking cash or other non-like-kind property during a 1031 exchange. Let’s say someone wants to buy your $20 million property that you own free and clear, but they’re having a hard time getting financing so they ask if you’ll entertain a contract for deed where they give you $2 million down and $18 million over time.

If you want to do a 1031 exchange you need to buy a property of equal or greater value and equity. If you sell on a contract for deed, you might be shooting yourself in the foot on the ability to do a 1031 exchange. In year one of an installment sale, you get to trigger all of the depreciation recapture. If you took that contract for deed deal, by the time you’re done paying your real estate commissions and recaptured depreciation, your downstroke may be gone. Don’t do seller-backed financing if you want to do a 1031 exchange.

Another potential 1031 problem is not adequately offsetting debt relief. When you sell your relinquished property, they pay off the old mortgage. In order to completely defer your gains in a 1031 exchange, you are expected to acquire a property of equivalent or greater value, equity, and debt. There are two ways to approach this debt relief issue:

1. Take out a new mortgage on the replacement property.

2. Bring cash to the closing table to offset the debt.

Most people opt for option one because they don’t have sufficient cash on hand.

Many people fail to consider the debt offset element in a 1031 exchange and that makes it much more difficult to defer 100% of the capital gains taxes.

Section 1031 – A Tax-Saving Tool

Section 1031 is a powerful provision in the tax code that allows you to save money when selling investment or business real estate. Find out if a 1031 exchange is a good fit for your property by contacting a 1031 exchange company like CPEC1031, LLC. Our qualified intermediaries have more than twenty years of experience in the 1031 exchange industry. We can walk you through the entire process from beginning to end and make sure you hit all the necessary deadlines and benchmarks along the way.

• 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

Video – A Lesson on 1245 & 1250 Property in a 1031 Exchange

In a 1031 exchange, if you treat your property both as 1250 property and as rapidly depreciated components (1245 property) and you exchange right into raw land, there’s going to be a mismatch. That’s because the raw land is considered entirely 1250 property.

This can lead to a mismatch wherein the portion of the property that you treated for rapid depreciation doesn’t have a component to match up with on the replacement property side of the equation. In this scenario, you may not want to purchase purely raw land as your replacement property. You may want to look for some land that has some depreciable components on it (such as a grain silo, chicken coop, etc.) so that you can match up your 1250 gain and your 1245 gain when conducting your 1031 exchange.

Defer Your Taxes When Selling Investment Real Estate

Instead of recognizing a potentially huge capital gains tax burden, defer your taxes with a 1031 exchange when selling investment real estate. Section 1031 of the Internal Revenue Code can be utilized by anyone who satisfies the requirements. Contact a qualified intermediary at CPEC1031, LLC today to learn more about the like-kind exchange process and see if your property qualifies for 1031 exchange treatment. You can find us at our Twin Cities office, which is located in downtown Minneapolis. We are ready and waiting to help you through the 1031 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

Video – How a 1031 Exchange Allows You to Keep Deferring Until You Die

Throughout your lifetime you never want to unnecessarily recognize capital gains taxes. With a 1031 exchange, you can continue deferring your capital gains tax burden until you die.

When your heirs inherit your property upon your passing, they get a step up in basis. Rather than getting the low basis that you had in the property during your lifetime, your heirs receive the property with a basis stepped up to the fair market value. It’s almost too good to be true.

Get Your Like-Kind Exchange in Motion

Begin the process of deferring your capital gains taxes with a like-kind exchange today by contacting CPEC1031, LLC. Our qualified intermediaries have decades of experience working on 1031 exchanges of all shapes and sizes across the United States. We can help answer your questions, assist in document preparation, and make sure you are ready when it comes time to close on your property. Reach out to our team of 1031 exchange professionals today at our Twin Cities office located in the heart of downtown Minneapolis.

• 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

Video – A Historical Timeline of Section 1031

Here’s a brief history of the 1031 exchange.

The section 1031 provision and its predecessors have been in the code for over 100 years. Since 1921, there’s been a version of section 1031 that allows for the tax-deferred exchange of property. The rationale for giving you a pass on triggering the recognition of the gain is that you’re not cashing out. If you’re continuing your investment into other like-kind property, you’re able to defer your capital gains tax burden. The government allows you to do that, in part, because they want to stimulate economic growth. They don’t want you to be locked into your property. When real estate transactions are happening, bankers are making more loans, real estate agents are making more commissions, title companies are doing more closings, and more.

In 1979, a critical event in the world of 1031 exchanges occurred. A lumber baron named T. J. Starker broke the mold on 1031 exchanges. Prior to Starker, it was assumed that all exchanges needed to be simultaneous. Starker opted to give up his lumber holdings in Oregon in exchange for some properties that would be determined later. Basically, he did the first legal non-simultaneous exchange. That blew the IRS’s mind and they litigated it all the way to the Supreme Court, where Starker won. Today, nearly all 1031 exchanges are done in the mold of Starker’s non-simultaneous exchange.

In the 1980s-1990s, the IRS got Congress to authorize the Treasury to write their own regulations regarding 1031 exchanges. These rules were written to limit the number of people conducting 1031 exchanges. They introduced the 180 day deadline, as well as the 45 day identification period.

When the IRS came out with the initial regulations for forward exchanges in 1991 they didn’t outline specifics for reverse 1031 exchanges. Then in the year 2000, rev. proc. 237 was issued on how to do safe harbor reverse exchanges.

In 2018 the Tax Cuts and Jobs Act limited 1031 exchange property to real estate and eliminated the use of personal property.

Find a Qualified Intermediary for Your Next 1031 Exchange of Real Estate

Find a qualified intermediary for your next 1031 exchange of real estate by contacting CPEC1031, LLC today. We have more than two decades of experience working on 1031 exchanges of all shapes and sizes. We are well equipped to handle all the unique details of your next like-kind exchange under section 1031 of the Internal Revenue Code. Whether your doing a forward exchange, reverse exchange, or something in between, our qualified intermediaries are ready and waiting to help ensure you defer 100% of your capital gains tax burden.

• 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