When you’re doing a 1031 exchange you have to identify your replacement property within 45 days and it has to be clearly and unambiguously defined. The identification must be signed by you in writing and sent in. But what happens if you don’t buy the entirety of what you identified? What if you identified four acres and you only ended up purchasing three of those four acres? Is that going to be satisfactory to the IRS for 1031 exchange purposes?
In an interesting treasury regulation for the treatment of 1031 exchanges, that same fact pattern came up. The taxpayer only ended up purchasing 75% of what they had originally identified. The IRS reasoned that the nature of what the taxpayer received was substantial the same and they allowed the 1031 exchange to proceed.
Consider the 1031 Exchange
The next time you’re selling a piece of investment real estate, consider a 1031 exchange that allows you to defer your capital gains tax burden. The catch is you have to reinvest your sales proceeds into a bigger replacement property. A 1031 exchange needs to be a continuation of your investment so pocketing any of the net proceeds is a big no-no. A qualified intermediary can help you through all these details and more. Contact the team at CPEC1031, LLC today to get started with your exchange. We have decades of experience in the 1031 exchange industry and have the knowledge to help you through your next like-kind 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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