reverse exchange

How CPAs can Advise Their Clients on Reverse 1031 Exchanges

Reverse 1031 Exchanges

Reverse exchanges offer a lot of benefits in a hot seller’s market, but many taxpayers are unaware of how to properly utilize this effective tool. In this article, we are going to offer some tips that CPAs can use to advise their clients on reverse 1031 exchanges of real estate.

Use Reverse Exchanges in a Hot Seller’s Market

When the market favors sellers (as it does at the time of this writing), a reverse exchange can be a huge asset. Reverse 1031 exchanges operate a bit differently than standard forward exchanges. In a forward exchange, here is the order of operations:

  1. The taxpayer sells their relinquished property.

  2. The taxpayer identifies new replacement property.

  3. The taxpayer acquires their replacement property and reinvests their sales proceeds into it.

In a reverse exchange, the order of operations is reversed:

  1. The taxpayer acquires their new replacement property first.

  2. The taxpayer identifies their new replacement property in writing.

  3. The taxpayer sells their relinquished property and reinvests the sales proceeds into the replacement property.

Minnesota 1031 Exchanges of Real Property

Looking for a qualified intermediary to facilitated your 1031 exchange? Your search stops here! At Commercial Partners Exchange Company, we focus on like-kind exchanges under section 1031 of the IRC. With twenty years of experience under our belts, we have the knowledge and expertise needed to bring your exchange across the finish line. Contact us today at our Minneapolis office to learn more about the 1031 exchange process and get your exchange off the ground!

  • 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.

 

© 2019 Copyright Jeffrey R. Peterson All Rights Reserved

 

Competing for 1031 Replacement Property in a Hot Real Estate Market

Hot Real Estate Market

When the real estate market is hot, finding the right replacement property for your 1031 exchange is all the more difficult. Even when you do find a replacement property that you love, it may get snatched from beneath you before you can close the deal. In this article, we are going to offer some tips when competing for replacement property in a 1031 exchange.

The Reverse Exchange Option

If you are finding it hard to secure the replacement property you want; if all the properties you look at are getting snatched up by other buyers – then a reverse exchange is your best bet. With a reverse 1031 exchange, you can purchase your replacement property before you sell your relinquished property. This is essentially the opposite order of a typical 1031 exchange. Reverse exchanges are especially useful in hot real estate markets when properties are selling fast. A reverse exchange allows you to grab a replacement property without waiting until your relinquished property sale goes through. Then, within the following 180 days, you sell your relinquished property to complete the exchange.

Reverse Exchanges of Like-Kind Property

For more than twenty years, the 1031 exchange accommodators at Commercial Partners Exchange Company have been helping clients defer their taxes with section 1031 of the Internal Revenue Code. Let us help you prepare your documentation, and make sure you hit all of the necessary requirements. Reach out to the 1031 exchange professionals at Commercial Partners Exchange Company today to get your exchange off the ground. You can find us at our main office in downtown Minneapolis.

  • 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.

 

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

 

How to Use a Reverse 1031 Exchange in a Hot Real Estate Market

Reverse Exchange

A competitive real estate market can be a blessing and a curse for investors. On the one hand, it’s great to be able to sell property quickly when needed. On the other hand, if you’re looking to reinvest your money into another property, it can be difficult to find the property you want before it gets snatched up by another buyer. This is where a reverse 1031 exchange can be a great help. In this article, we are going to explain how to use a reverse 1031 exchange to your advantage in a hot seller’s market.

Benefits of a Reverse Exchange

Using a reverse exchange, you can purchase your replacement property first, and subsequently sell your relinquished property. This allows you to snatch up the perfect replacement property if it comes up before you are able to sell your relinquished property.

Of course, the standard 1031 exchange time frames still apply to a reverse exchange. Namely, you have 180 days in total to complete your exchange – beginning with the purchase of your replacement property.

Twin Cities Reverse Exchange Company

At Commercial Partners Exchange Company, our qualified intermediaries have been assisting clients with reverse exchanges of real estate for more than two decades. We are fully equipped to guide you through every step in your 1031 exchange. Our intermediaries can prepare all of your exchange documents, answer all of your questions, and advise you on appropriate replacement properties. Contact us today at our downtown Minneapolis office to speak with one of our qualified intermediaries about your reverse 1031 exchange.

  • 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.

 

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Steps to Take After a Reverse 1031 Exchange

Information in a 1031 Exchange

After a reverse exchange is completed and a replacement property that was parked by the intermediary has been conveyed to the taxpayer, the business may not be done. There may still be some administrative tidying up that needs to be done.

Change of Address

For example, the LLC that parked and held title to the replacement property may have been assigned to the taxpayer, but the records with the Secretary of State may still reflect the intermediary’s address as the business address of the LLC and as the registered agent. One administrative step after the reverse exchange is done is to file a new annual report with the Secretary of State reflecting the correct address and who is the new registered agent of the LLC.

If the address where the county tax statements are being sent to is showing as the intermediary’s address, the local county may continue to send the tax bills to the intermediary’s address rather than to the taxpayer. So another item to tidy up is to file or notify the local tax assessor where you want your tax statements and tax bills to be sent to in the future.

Notify the IRS

It may also be prudent to contact the IRS and notify them that the ownership of the LLC has substantially changed and request a new EIN number for the LLC.

These are little administrative items that are prudent to take immediately after the reverse exchange has been wrapped up. It's important not to delay too long because otherwise correspondence and important communication may be routed to the wrong address and the taxpayer may not receive that information for some time.

  • 1031 Hotline: If you have questions about administrative items after a reverse 1031 exchange, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved

The 3 Most Common Types of Real Estate Exchanges

Real Estate Exchange Types

1031 exchanges come in several different types – all of which can be beneficial depending on your unique situation and ultimate goals. In this article, we are going to briefly explain three of the most common types of 1031 exchanges involving real estate.

Forward Exchanges

The forward exchange is the most common and “standard” type of 1031 exchange. This is typically what people picture when they think of 1031 exchanges. In a forward exchange, you sell a piece of relinquished property. Then, you identify replacement property in the 45 days thereafter. Finally, you close on your new replacement property and roll your net proceeds into that property on or before the 180th day following your relinquished property sale.

Reverse Exchanges

A reverse 1031 exchange accomplishes the same ultimate goal of a standard exchange (that of tax deferral) but with the order reversed. Instead of selling the relinquished property first, a reverse exchange starts with the acquisition of replacement property, and ends with the sale of the relinquished property. All time frames are the same. Reverse exchanges are useful in a hot seller’s market when you need to snatch up an ideal property before someone else does.

Build-to-Suit Exchanges

A build-to-suit exchange (also known as a construction improvement exchange) is a 1031 exchange in which the exchangor constructs improvements to their replacement property prior to the closing. This type of exchange is good for people who have found a replacement property that doesn’t quite fit their needs. With a construction exchange, you can make the necessary improvements to your replacement property and include those as a part of your exchange.

  • 1031 Hotline: If you have questions about the different types of 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved