In a 1031 exchange, if you treat your property both as 1250 property and as rapidly depreciated components (1245 property) and you exchange right into raw land, there’s going to be a mismatch. That’s because the raw land is considered entirely 1250 property.
This can lead to a mismatch wherein the portion of the property that you treated for rapid depreciation doesn’t have a component to match up with on the replacement property side of the equation. In this scenario, you may not want to purchase purely raw land as your replacement property. You may want to look for some land that has some depreciable components on it (such as a grain silo, chicken coop, etc.) so that you can match up your 1250 gain and your 1245 gain when conducting your 1031 exchange.
Defer Your Taxes When Selling Investment Real Estate
Instead of recognizing a potentially huge capital gains tax burden, defer your taxes with a 1031 exchange when selling investment real estate. Section 1031 of the Internal Revenue Code can be utilized by anyone who satisfies the requirements. Contact a qualified intermediary at CPEC1031, LLC today to learn more about the like-kind exchange process and see if your property qualifies for 1031 exchange treatment. You can find us at our Twin Cities office, which is located in downtown Minneapolis. We are ready and waiting to help you through the 1031 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.
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