How to Treat Unsecured Debts in a 1031 Exchange

Many people have questions about the tax treatment of unsecured debts in a 1031 exchange, especially if the (requisite) satisfaction of which appear to not be tied contractually to the sale of the relinquished property.

Boot gain may be realized in an exchange paying debts not secured by a mortgage or deed of trust on the relinquished property.

It may be beneficial to discuss ways to create a contractual nexus between the sale closing and the payment of the debts. This would involve including a material and substantial requirement in the purchase agreement with the buyer; or restating the notes with your lenders to change the terms and add a requirement of satisfaction upon sale of the subject real estate.

Defer Capital Gains Tax with a 1031 Exchange

A 1031 exchange can help you defer capital gains tax on the sale of investment real estate. A qualified intermediary can guide you through the exchange process and make sure everything goes off without a hitch. At CPEC1031, LLC we have been working on like-kind exchanges for over twenty years. Give us a call today to learn more about the tax-saving benefits of a 1031 exchange. You can find us at our primary offices in downtown Minneapolis. We provide like-kind exchange services to taxpayers across the United States.

 

  • 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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