Many years ago, we did a 1031 exchange for a client who had a relinquished property that was a real stinker. The only way to offload the property was to seller-finance the buyer via a promissory note. This creates a problem if the ultimate goal is capital gains tax deferral with a 1031 exchange because you need to maintain or increase your equity when exchanging into a replacement property.
The solution: cash is king.
The client brought cash to the closing to loan to the buyer so that the intermediary still received the same amount of net proceeds. This allowed the equity to be cleanly traced from the relinquished property, through the qualified intermediary, to the replacement property. This is a great solution to the seller-backed financing problem that can arise during a 1031 exchange, but it does require you to have a lot of cash on hand.
Like-Kind Exchange Qualified Intermediaries
CPEC1031, LLC facilitates like-kind exchanges under section 1031 of the Internal Revenue Code both in Minnesota and across the country. Our qualified intermediaries are here to help you understand all the nuances of the 1031 exchange and guide you through the process so that you can defer 100% of your capital gains tax burden. Reach out to our team today to get help deferring your taxes in a 1031 exchange transaction. You can find us at our primary office location in 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.
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