Without the proper planning and precautions, 1031 exchanges can fail. In this article, we are going to talk about how 1031 exchanges fail and how to avoid a failed 1031 exchange.
Constructive Receipt
Perhaps the biggest reason that 1031 exchanges fail is that the taxpayer conducting the exchange receives boot during the exchange process. Boot can come in many forms.
If you take constructive receipt of any boot throughout the process, you can end up with a failed or partial exchange. To prevent this, make sure you take care to avoid receiving boot at all times during your exchange period.
Failure to Meet the Requirements
Your 1031 exchange can also fail if you do not meet the numerous requirements set out by the IRS. If your exchange does not complete within the allotted 180 day time period, your exchange will fail. If your property fails to meet the 1031 exchange requirements (like-kind, qualifying purpose), your exchange will fail. If you do not go up in value, equity, and debt on your replacement property, your exchange will fail. Be sure to check off all the appropriate boxes and work with your qualified intermediary to make sure your exchange meets all the necessary requirements.
Qualified Intermediaries in Minnesota
Looking for a qualified intermediary in Minnesota? You’ve come to the right place! At CPEC1031, our intermediaries have over twenty years of experience facilitating exchanges throughout Minnesota and the United States. We can help you identify replacement property, prepare your 1031 exchange documents, and more! Contact us today to learn more about our qualified intermediary services and get your exchange started! Our main office is located in the heart of downtown Minneapolis, but we work with taxpayers throughout the United States on their exchanges of real estate.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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