In the Internal Revenue Code, there is a provision called section 1031. This code section says that if you structure your transaction not as a taxable sale, but as a swap, you can dispose of your appreciated real estate you’ve held for investment or business purposes and exchange it for other like-kind property that’s also going to be held for investment or business purposes.
There are two parts to this litmus test:
You must exchange into “like-kind” property. The definition of like-kind in the realm of section 1031 is very broadly construed. Pretty much any real estate in the United States is considered like-kind. An exception to that would be shorter term leases. If you have an airport hangar, it’s probably on a 10-year ground lease. In order for a leasehold estate to be considered like-kind you need to have at least 30 years remaining on that lease, including unexercised options for renewal.
Both the relinquished property and the replacement property have to be held for a qualified purpose. In the world of 1031 exchanges, qualified purpose means that your intent must be to hold the property for investment or for use in your trade or business.
Find a Qualified Intermediary for Your Next 1031 Exchange
Reach out to CPEC1031, LLC today to find a qualified intermediary for your next 1031 exchange of investment or business real estate. We have more than two decades worth of experience under our belts. During that time, we’ve worked on all types of 1031 exchanges (forward, reverse, build-to-suit, etc.) and can work with you through the entire process. Contact us today to learn more about the tax-deferral benefits of a 1031 exchange of real estate and see how we can help. You can find us at our Twin Cities office in Minneapolis.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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