The 1031 exchange is a powerful and versatile tool that allows a taxpayer to exchange into and out of property in different sectors of the commercial real estate market. In this article, we are going to offer up some pro tips for 1031 exchanging property in different industries.
Like-Kind Real Property
All property involved in a 1031 exchange needs to be like-kind in order to qualify for tax-deferral. The good news is that like-kind is very broadly defined when it comes to real property. As long as your real property is held for investment or business purposes, it is most likely like-kind to any other real property held for a qualifying purpose. That means you can sell a relinquished property in one sector of the marketplace, and exchange into a replacement property in a totally different sector, as long as all the other requirements are met.
A 1031 Exchange Example
Let’s explain this further by examining a hypothetical example. Imagine you own a duplex that you want to sell in a 1031 exchange. You could sell that duplex and exchange into a replacement property in the same industry (perhaps into a triplex or four-plex), or you could exchange it for property in a completely different industry (a motel for example).
Contact a Qualified Intermediary
If you’re interested in learning more about the tax-saving benefits of a 1031 exchange, contact CPEC1031, LLC today. Our qualified intermediaries have over twenty years of experience facilitating 1031 exchanges of all stripes. Our team of professionals can guide you through the process and make sure your exchange is a success. Contact us today at our downtown Minneapolis offices to learn more about the process and see if you are a good candidate for a like-kind exchange of real estate.
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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