A Lesson About Basis & Why You Need to Involve Your Tax Advisor in Your 1031 Exchange
Ouch! You thought you were going to defer your gains in a partial 1031 exchange. Knowing that you were buying down in value, you hoped that you would get some benefit from the 1031 exchange. But you’re disappointed now because you bought a replacement property that was too far down in value. The reason that you’re not getting any tax deferral is that you have a transferred basis in a 1031 exchange. Your old basis transfers to the new property and you only start enjoying tax deferral for every dollar of value you buy over and above your transferred basis.
The starting point for this analysis is to talk to your accountant or tax advisor and ask what your current adjusted basis is and how low you can buy while still enjoying some measure of tax deferral.
Another way to fix this problem is to identify and purchase multiple replacement properties and cobble together enough value to get the desired tax deferral.
You could also do a build-to-suit exchange in which you erect improvements upon the replacement property during your 180 day exchange period to increase the value of the replacement property and enhance the amount of tax deferral that you enjoy.
CPEC1031, LLC – Your 1031 Exchange Intermediaries
Find a qualified intermediary for your next like-kind exchange by contacting CPEC1031, LLC. We have been facilitating like-kind exchanges under section 1031 of the Internal Revenue Code for decades. Our intermediaries have the knowledge and skills necessary to guide you through each and every stage of your 1031 exchange. Whether you’re conducting a forward exchange, a reverse exchange, or a construction exchange, we can help. Contact us today at our Twin Cities office in downtown Minneapolis to start the process!
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.
© 2025 Copyright Jeffrey R. Peterson All Rights Reserved