1031 exchange basics

The Importance of Preparation in a 1031 Exchange

A well-structured 1031 exchange doesn’t rely on guesswork, or last-minute scrambling. It relies on preparation and coordination execution.

Under Section 1031 of the Internal Revenue Code, investors can defer capital gains taxes by exchanging one investment property for another “like-kind” property. While the concept sounds straightforward, things can get complicated quickly. A successful 1031 exchange requires careful planning long before the closing table.

What Is a 1031 Exchange?

Section 1031 is a provision in the US tax code that allows real estate investors to defer capital gains taxes when they reinvest proceeds from the sale of investment or business property into another qualifying property.

The benefits of a 1031 exchange can be substantial:

  • Tax deferral on capital gains

  • Preservation of investment capital

  • Portfolio reallocation

  • Potential compounding of equity over time

However, the IRS imposes strict rules and timelines on all 1031 exchanges. You must meet all of the following benchmarks to defer 100% of your capital gains tax burden:

  • You only have 45 days to identify replacement property

  • You only have 180 days to complete the exchange process

  • You may not receive any taxable boot during the process

These are just a few of numerous requirements of a successful 1031 exchange. It’s important to give yourself a long lead time to fully prepare yourself before beginning your exchange.

A 1031 exchange rewards foresight and proper preparation. Investors who approach a 1031 exchange casually often find themselves reacting to deadlines. Investors who prepare properly control the process.

A 1031 Exchange Can Save You Money in Capital Gains Taxes

A like-kind exchange under section 1031 of the Internal Revenue Code can help you save money in capital gains taxes, thus keeping your money compounding over time in a continued investment. CPEC1031, LLC has been helping taxpayers just like you through the details of their 1031 exchanges for decades. We can answer all of your questions, prepare your 1031 documents, and make sure you meet all the necessary rules and regulations of section 1031. Contact us today at our Twin Cities office, located in downtown Minneapolis to get your exchange up and running!

  • 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

A 1031 Exchange is a Team Sport

It takes the right team working together to get your 1031 exchange right and defer 100% of your capital gains taxes. Why is a 1031 exchange like a team sport? Because it touches more than just real estate. A single 1031 exchange can impact:

  • Taxes

  • Legal structure

  • Financing

  • Timing

  • Long-term income

  • Estate planning

Let’s talk about some of the essential players that make up a 1031 exchange team.

Qualified Intermediary

  • Holds exchange funds to preserve tax deferral

  • Ensures IRS rules and timelines are followed

  • Facilitates the mechanics of the exchange

  • A qualified intermediary does not give tax or legal advice but without one there is no deferred exchange.

Legal Counsel

  • Reviews ownership structures and legal entities

  • Advises on trusts, estate considerations, and contracts

  • Flags legal risks that do not show up on a spreadsheet

  • Ensures that the exchange is structured correctly

Banker

  • Helps plan debt replacement and avoid mortgage boot

  • Structures financing aligned with exchange timing

  • Ensures capital does not become the bottleneck

  • Answers the question: “how do we finance this without breaking the exchange?”

Accountant / Tax Advisor

  • Calculates gain, depreciation recapture, and exposure

  • Models scenarios before the sale

  • Evaluates how a 1031 exchange fits with your broader tax picture

  • Answers the question: “what does this decision actually mean on my tax return?”

Title / Escrow Agent

  • Executes clean closings

  • Coordinates with the qualified intermediary on fund flow

  • Prevents technical errors that can derail an exchange

  • Answers the question: “did this close exactly the way the IRS requires?”

Find a Qualified Intermediary to Help with Your 1031 Exchange

At CPEC1031, LLC, our qualified intermediaries can help you through all the details of your next 1031 exchange of investment or business real estate. We have decades of experience facilitating 1031 transactions in Minnesota and across the United States. Let our team help guide you through the process of deferring your capital gains taxes under section 1031 of the Internal Revenue Code. Contact us today at our Twin Cities office to learn more about the process and get your like-kind exchange up and running!

  • 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

4 Strategic Questions to Ask Yourself Before Starting a 1031 Exchange

When you’re considering a 1031 exchange of your investment or business property, the first thing you should do (prior to considering structures and timelines) is to ask yourself these strategic questions about your property:

  1. What role does this property play in your income today?

  2. What role do you want the property to play 10 years from now?

  3. Who in the family needs flexibility and who needs certainty (when considering your estate planning)?

  4. Is the goal to stay active in this property or to thoughtfully transition to a different type of property (perhaps one that is less management intensive)?

When those answers are clear, the right 1031 exchange strategy tends to reveal itself. Of course, these are just a few of many questions you need to ask yourself prior to beginning your 1031 exchange. If you need help answering these questions, a qualified intermediary can help.

1031 Exchanges Offer Many Benefits

A 1031 exchange is a powerful tool that allows for tax deferral on the sale of like-kind property that’s held for investment or business purposes. That being said, there are a litany of rules and regulations that you must abide by in order to successfully defer your capital gains tax burden. At CPEC1031, LLC, our team of like-kind exchange professionals are here to help you through the 1031 exchange process from start to finish. We can answer your questions, help put together documentation, and make sure you are fully prepared for the closing table. Contact us today to learn more about the process and get the ball rolling!

  • 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

Video – Rethinking 1031 Exchanges of Farmland

The problem with farmland is that the cash-on-cash returns are not that lucrative. Institutional grade investment commercial real estate can provide an alternative because it offers a higher rate of yield, and a more steady and reliable source of income. Furthermore, if you purchase it through a DST (Delaware Statutory Trust) it’s a divisible asset that can be divided up amongst your heirs upon your passing with a stepped up basis.

Exchange Your Property with Section 1031

Defer your capital gains taxes when you exchange like-kind property for like-kind property under section 1031 of the Internal Revenue Code. At CPEC1031, our qualified intermediaries are here to help you navigate the 1031 exchange process from beginning to end. We have more than twenty years of experience facilitating transactions under section 1031 and can help ensure that you are set up for success. Contact us today at our Twin Cities office in downtown Minneapolis to learn more about the process and get your 1031 exchange started!

  • 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

 

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Video – What to Do When One Partner Doesn’t Want to Do a 1031 Exchange?

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Sometimes real estate is owned by an LLC that’s taxed as a partnership and not all of the members want to do a 1031 exchange. They would rather get out of the entity before a sale takes place so that they can take their share of the net proceeds independent from the LLC and deal with the tax consequences. This is sometimes called a TIC (Tenancy in Common) out. The reason that you want to TIC them out is that they don’t want to go along with the rest of the entity and do a 1031 exchange. Rather, they simply want to take their cash and pay their taxes. If you’re going to TIC someone out you need to make sure that you actually transfer the benefits and burdens of ownership. You need to deed them their interest. You want to assign their share of the seller’s rights and obligations in the purchase agreement. You want to notify the insurance company to add an additional insured (the new tenant in common owner). You may also want to talk to your lender that holds the mortgage and get their consent to this transfer.

Find a 1031 Qualified Intermediary

Find a qualified intermediary to help with your next 1031 exchange by reaching out to the team at CPEC1031, LLC. We have been working in the 1031 exchange industry for more than two decades. Our team can help you through all the stages of your 1031 exchange – from document preparation, to property identification, all the way to the closing table. Set yourself up for success by working with a qualified intermediary. We can make sure that you have the best shot at deferring 100% of your capital gains taxes when selling 1031 property.

  • 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.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

Defer the tax. MAXIMIZE your gain.

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