You don’t need to know everything about 1031 exchanges before starting one, but it’s important to have an understanding of the basics before jumping into the process. In this article, we are going to lay out the basic rules of a 1031 exchange and discuss some common mistakes to avoid.
Like-Kind Property
In any 1031 exchange, all property involved in the process needs to be “like-kind.” That means you need to exchange US real estate for US real estate.
Common Mistake: Using Personal Property. Though it was once allowed under section 1031, you can no longer use personal property (such as aircraft, business equipment, etc.) in a 1031 exchange.
Intent Matters
It’s also important to remember that your intent matters a great deal in a 1031 exchange. Throughout the process you need to show to the IRS that you intend to hold your 1031 properties for investment or business use.
Common Mistake: Trying to Exchange Your Primary Residence. Any property held primarily for personal use (like your primary residence) cannot be used in a 1031 exchange because that property is not held primarily for investment purposes in the eyes of the IRS.
Get Your 1031 Exchange Up and Running Today
Get your 1031 exchange of real estate up and running today by contacting one of the qualified intermediaries at CPEC1031, LLC. Our team of exchange accommodators can help you through each and every step in the 1031 exchange process – from property identification to the closing of your replacement property. With more than twenty years of experience, we have the skills and expertise needed to ensure a smooth transaction. Give us a shout at our Twin Cities office today to learn more about the like-kind exchange process and see if your property qualifies.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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