Forward Exchange
In a forward 1031 exchange, you sell your relinquished property first and you acquire the replacement property second. You can exchange into a single replacement property or multiple replacement properties.
Reverse Exchange
Another option is a reverse 1031 exchange, in which the intermediary acquires the replacement property and holds it for the benefit of the taxpayer. There are two different modalities of a reverse exchange:
The Back Leg Reverse Exchange. In this type of exchange, the qualified intermediary acquires the replacement property and holds it for the benefit of the taxpayer.
The Front Leg Reverse Exchange. If you can’t park the replacement property for some reason (for example, if your buyer flakes at the last minute), you can do a front leg reverse exchange. In this modality, the intermediary becomes the synthetic purchaser of your old relinquished property to liberate the taxpayer so they can acquire the replacement property.
The Build-to-Suit Exchange
In a build-to-suit 1031 exchange, you sell your relinquished property, put the sales proceeds with the intermediary, who then uses that money through an Exchange Accommodation Titleholder to buy the replacement land. Within the remaining 180 day exchange period, they construct improvements on the property. Let’s say you have a sale of $2 million and a purchase value of only $1.8 million. How do you resolve this $200K discrepancy? Have the intermediary erect improvements during the exchange period so when you receive the replacement property it’s worth at least $2 million.
Call CPEC1031, LLC Today
If you are interested in selling a piece of investment real estate but you don’t want to deal with the associated capital gains tax burden, then a 1031 exchange might be a good option for you! In a 1031 exchange, you can defer your capital gains taxes so long as you meet certain criteria. At CPEC1031, LLC we are here to help you through every step in the like-kind exchange process. We can prepare your documents, ensure you hit the 1031 exchange benchmarks, and answer all of your questions along the way. Get started with your 1031 exchange by giving us a call today!
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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