Safe vs. Non Safe Harbor Exchanges

When the regulations came out for 1031 exchanges, just about everybody gravitated towards the safe harbor exchanges, which allow for a sale to occur to a third party and a purchase to occur within 180 days. The only real curve ball is that under the safe harbor you have to identify in writing your replacement property within 45 days.

Safe Harbor Exchanges

The regulations do not prohibit you from doing a non-safe harbor straight exchange. But in a non-safe harbor exchange it's much more difficult to get the stars into alignment because you don't have the benefit of the deferred exchange timeline. Typically, in a non-safe harbor exchange would have to be a direct swap where you sell your relinquished property to party A and you simultaneously receive your new replacement property from party A (the same party). It’s like the old fashioned horse swap, I'll give you my horse in exchange for you giving me your horse.

Non-Safe Harbor Exchanges

A non-safe harbor exchange does not require you to hire a qualified intermediary but does require that you do a simultaneous swap with the party that you are giving your relinquished property to. For that reason it’s much more difficult to do a non-safe harbor straight exchange and given that the fees and expenses for doing a deferred safe harbor exchange are so minimal most people avail themselves with the protections of the safe harbor even when they are doing a quick or simultaneous exchange because they want the certainty that the safe harbor protections provide.

• Start Your 1031 Exchange: If you have questions about safe vs. non safe harbor exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2016 Copyright Jeffrey R. Peterson All Rights Reserved

Whiteboard Video - Cashout Refinancing Before a 1031 Exchange

In this whiteboard animation video, we discuss the pros and cons of doing a cashout refinancing before a 1031 exchange.

• Start Your 1031 Exchange: If you have questions about cashout refinancing before a 1031 exchange, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2016 Copyright Jeffrey R. Peterson All Rights Reserved

Deferring Tax with a Reverse 1031 Exchange

In today's marketplace it's really easy to be a seller because it’s a hot seller's market. There's a lot of people competing for the same replacement properties particularly in certain segments of the market like multi-family apartments. Here's where a reverse exchange can help you solve the problem of how to align your relinquished property with your replacement property. 

How a Reverse Exchange can Help

Step one is do a reverse exchange, find the replacement property first since that's the harder task lock it up with a purchase agreement and if necessary you can close on it having your qualified intermediary form a new LLC and that LLC acts as a straw man purchaser and temporarily holds title to the replacement property for up to 180 days until you then later sell the relinquished property.

So the beautiful thing is once you've sold your relinquished property it's really easy to complete your exchange because your replacement property is waiting for you on the shelf and we just take that replacement property off the shelf and transfer it to you to complete the exchange.

The Problem

The problem is that it's hard to find replacement properties the opportunity is to use a reverse exchange to lock in a sure thing so that you know with certainty you have your replacement property waiting for you at the end of this process.

• Start Your 1031 Exchange: If you have questions about reverse 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2016 Copyright Jeffrey R. Peterson All Rights Reserved

Whiteboard Video - Reverse 1031 Exchange Tips

In this whiteboard animation video, we offer some tips for engaging in a reverse 1031 exchange.

• Start Your 1031 Exchange: If you have questions about reverse 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2016 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Exchanges for Divorcing Couples

What do divorced people need to know about 1031 exchanges? Here are some things to consider when juggling a 1031 exchange and a divorce.

Financial Issues of Divorce

When you get divorced and receive a property in a marital termination, you may receive 100% ownership of the property or you might split the ownership with your ex-spouse.

Alternatively, your ex-spouse may have a lien against the property you are selling. So if you've been divorced and now you are selling an appreciated asset, you need to be particularly concerned with the tax ramification of your sale of that property. If you own the property 50/50 with your old spouse, each of you as co-­sellers could separately do 1031 exchanges, or one spouse may choose to do an exchange while the other ex-spouse may choose to take their tax hit.

Marital Liens

If you received 100% ownership of the property in the divorce but your spouse maintains a marital lien on the property, you'll need to pay off that marital lien at the closing of the relinquished property. And then when you acquire your new replacement property you want to make sure that your new property is of equal or greater value than your old property, that you've reinvested all of your net proceeds, and that you've offset any debt relief including the marital lien with new debt or new cash in on the replacement property.

• Start Your Exchange: If you have questions about 1031 exchanges during a divorce, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2016 Copyright Jeffrey R. Peterson All Rights Reserve