To Exchange, or Not to Exchange - A 1031 Case Study

Like-Kind Exchange Deferral

Here’s an interesting 1031 exchange case we recently assisted a client with. The client was selling a Jiffy Lube in St. Paul and was wondering whether or not to do a 1031 exchange on the property. The seller was concerned about feeling pressured into a less-than-ideal acquisition if they couldn’t find a replacement property that fit their desires.

This is a common dilemma that many face when considering a 1031 exchange. Should you set up the exchange, and if you can’t find a quality replacement property, break the exchange, pay the taxes, and only be worse off the reasonable costs incurred to have set up the exchange?

 Keep Your Options on the Table

I would set up the 1031 exchange to keep all of the options (for tax deferral) on the table for as long as possible. You don’t have identify any replacement properties if you don’t see any good deals within the 45 day identification period; and if you do identify, you don’t have to purchase any of the identified replacement properties during the remaining 135 days (of the 180-day exchange period), if your due diligence results are not favorable. Yes you can fail, but if you don't try you will never know if you could both defer the tax and receive a truly quality replacement property to complete your 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.

 

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