Partial 1031 exchanges occur when the taxpayer doing the exchange recognizes some gain and is not able to fully defer their capital gains taxes. In this article, we are going to discuss partial 1031 exchanges – why they happen and how to best avoid them.
Partial 1031 Exchange
In an ideal 1031 exchange, you want to defer all of your capital gains taxes on the sale of your relinquished property by moving all of your net proceeds into the new replacement property. However, sometimes taxpayers only qualify for a partial 1031 exchange.
A partial 1031 exchange is an exchange in which the exchangor receives some like-kind property and also recognizes some taxable gain. This is often due to one or more of the following factors:
- Failure to receive adequately valued replacement property
- Receiving mortgage boot
- Receiving cash boot
You can avoid the recognition of gain and defer all of your capital gains taxes with enough foresight and strategy. Often, partial exchanges occur because taxpayers do not have a full grasp on the requirements of a 1031 exchange. Working with a qualified intermediary can remedy those issues.
1031 Exchange Qualified Intermediaries
1031 exchanges allow you to defer your gains taxes on the sale of real property, but in order to do so you need to satisfy a number of requirements. Work with a qualified intermediary on your exchange to make sure your exchange meets the necessary benchmarks. Your intermediary can work with you, advise you on properties, prepare the required documents, and walk you through the 1031 exchange process. At Commercial Partners Exchange Company, our 1031 exchange accommodators have been working with clients on their 1031 exchanges for decades. Give us a call today to talk about your 1031 exchange!
- 1031 Hotline: If you have questions about partial 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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