There are many rules and guidelines that need to be followed to realize the tax saving benefits of a 1031 exchange. In this article, we are going to walk through the four most important rules you need to follow to ensure a successful 1031 exchange.
All of the property involved in your 1031 exchange (your replacement property and your relinquished property) needs to be like-kind in nature. With real estate, like-kind covers most types of real estate – as long as it abides by the other rules on this list. With personal property, you have to be much more careful and make sure you are exchanging like kind for like kind.
You need to have the right mindset or qualifying purpose with the property you are exchanging out of and into. Specifically, that means your property must be held for investment or business purposes. You cannot exchange property that you hold primarily for personal use, such as your primary residence.
You have to complete your 1031 exchange within 180 days total, starting after you sell your relinquished property. You have the first 45 of those days to identify your replacement property. If you do not finish your exchange by the 180th day, your exchange will fail.
Equity, Value, Debt
Finally, you want to make sure you are exchanging into a property of equal or greater value, equity, and debt compared to your replacement property.
Minneapolis Like-Kind Exchange Company
The qualified intermediaries at Commercial Partners Exchange Company have decades of experience helping taxpayers throughout the Minneapolis / St. Paul metro area with their 1031 exchanges. We work one-on-one with each client to address their unique situation. Our 1031 exchange accommodators will answer all of your questions, advise you on 1031 rules and regulations, and prepare all of your documents for the closing. Contact us today to speak with a qualified intermediary who can help you get your exchange of like-kind property off the ground!
- 1031 Hotline: If you have questions about 1031 exchange rules, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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