Qualifying your property is an essential first step in the 1031 exchange process. In this article, we are going to explain how to qualify real property for a 1031 real estate exchange.
Any property used in a 1031 exchange needs to fit the IRS definition for 1031. Specifically, property must be “held for investment or productive use in a trade or business.” That may sound black and white, but there is often a lot of gray area that makes it difficult to determine whether or not a property qualifies. Here are some of the things that the IRS considers when evaluating a property for 1031 treatment:
- The purpose for which the property was initially acquired;
- The purpose for which the property was subsequently held;
- The purpose for which the property was being held at the time of sale;
- The extent of advertising, promotion of other active efforts used in soliciting buyers for the sale of the property;
- The listing of property with brokers;
- The extent to which improvements, if any, were made to the property;
- The frequency, number and continuity of sales;
- The extent and nature of the transaction;
- The ordinary course of business of the taxpayer;
- How long the property has been owned.
Minnesota 1031 Exchange Intermediaries
1031 exchanges require the help of an experienced professional to ensure that everything goes according to plan. The qualified intermediaries at Commercial Partners Exchange Company have decades of experience working with clients across the country on their real estate exchanges. Give us a call today to learn more about the like-kind exchange process and whether your property qualifies. Our primary office is located in downtown Minneapolis but we serve the entire state of Minnesota, as well as the rest of the country.
- Start Your 1031 Exchange: If you have questions about real property in 1031 Exchanges, feel free to call me at 612-643-1031.
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