Common Misconceptions about 1031 Exchanges of Real Estate

1031 Exchange Misconceptions

The 1031 exchange has been around since the early 20th century, yet there are numerous misconceptions surrounding it. In this article, we are going to clear up a few of the most common misconceptions about 1031 exchanges of real estate.

I Can Complete My Exchange at Any Time After it Starts

Wrong. 1031 exchanges are governed by very strict time constraints. You’ve only got a total of 180 days to finish your exchange after you sell your relinquished property. The first 45 of those days are your identification period in which you must provide written identification of the properties into which you wish to exchange.

I Will Defer All of My Capital Gains Taxes When I Do a 1031 Exchange

Not necessarily. Ideally, you want to defer 100% of your capital gains taxes in your exchange, but that doesn’t always happen. If you receive any cash boot during the exchange, you will be subject to capital gains taxes. Likewise, if you fail to exchange into a property of equal or greater equity, value, and debt, you may only receive a partial tax deferral.

I Can Do a 1031 Exchange All By Myself

A 1031 exchange is not something you can do all by yourself. You need to involve a neutral third-party (typically a qualified intermediary) who can receive and reinvest the sales proceeds on your behalf.

Qualified Intermediary Specialists in MN

At Commercial Partners Exchange Company, our qualified intermediaries are specialists in exchanging real property. A qualified intermediary can help you organize your 1031 exchange documentation, advise you on replacement property identification, and answer all of your questions throughout the process. Contact us today at our downtown Minneapolis office to learn more about the 1031 exchange process and get your like-kind exchange off the ground.

  • 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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