In this article, we are going to talk about why you should let your qualified intermediary take care of your sales proceeds in a 1031 exchange of real estate.
Avoiding Boot
The primary reason you want to allow your qualified intermediary handle your sales proceeds in a 1031 exchange is to avoid boot. During the course of a 1031 exchange, if you at any point receive cash proceeds (known as boot) from the sale of your relinquished property, you will likely be taxed on these proceeds, simply because you received them.
The better course of action is to allow your qualified intermediary to take possession of and safeguard your sales proceeds from the relinquished property sale in a separate, segregated escrow account. Then, when it comes time to reinvest your proceeds into your new replacement property, your intermediary will move the funds from the escrow account into the new property. When done correctly, you (the exchangor) will never receive any of the funds and you will be able to defer 100% of your capital gains tax burden.
1031 Exchanges of Real Estate
1031 exchanges of real estate offer a tax-saving opportunity for investors who want to keep their money compounding and building wealth over time in a continued investment property. If you are ready to get the ball rolling on your like-kind exchange, your first step is to contact a qualified intermediary who specializes in 1031 exchanges of real estate. They can help guide you through the exchange process and ensure your property is a good fit. CPEC1031, LLC is here to meet all of your 1031 exchange needs. With over two decades of experience in the 1031 exchange industry, we have the knowledge and the skills needed to work through all the details of your next 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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