1031 Exchange Blog
In this 1031 FAQ video, Jeff Peterson talks about the same taxpayer requirement in a 1031 exchange. Watch more 1031 educational videos here.
Start Your 1031 Exchange: If you have questions about same taxpayer requirements in a 1031 exchange, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2017 Copyright Jeffrey R. Peterson All Rights Reserved
What are some ways that you can mitigate the adverse tax consequences of a failed or partially failed 1031 exchange? In this blog, we'll offer some strategies by examining a recent transaction that one of our clients did in Rochester, MN.
Recently we had a transaction in Rochester Minnesota where the taxpayer sold a $2,000,000 replacement property, and identified four million dollars of new replacement properties. After the 45th day had elapsed, their due diligence investigation of the replacement properties turned up some issues that made them rethink whether they really wanted to buy that replacement property.
In the end, those folks in Rochester Minnesota decided not to buy the replacement property, and so they were stuck thinking “well if we don't buy the replacement property we're going to have to recognize that gains on the sale of our old relinquished property. What are some things that we can do to alleviate the potential tax hit that we've got coming this year?”
A couple of different strategies can be used to offset or mitigate the tax gain. One of them is to use your exchange funds to buy interests in oil and gas exploration - what are called intangible drilling expenses.
By buying investments that have an immediate tax deduction for the intangible drilling rights you may spend a dollar but receive back $0.75 or $0.80 of immediate tax deduction. If you invest heavily enough in oil and gas exploration that you're allowed at least enough deductions to offset the gains that you’re incurring, you may be able to offset or wash all of the gains that you experience from the sale of your relinquished property by manufacturing immediate tax deductions through the intangible drilling rights.
Start Your 1031 Exchange: If you have questions about how to mitigate the consequences of a failed exchange, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2017 Copyright Jeffrey R. Peterson All Rights Reserved
In this 1031 FAQ video, Jeff Peterson talks about options for parking arrangements in a 1031 exchange. Watch more 1031 educational videos here.
Start Your 1031 Exchange: If you have questions about 1031 parking arrangements, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2017 Copyright Jeffrey R. Peterson All Rights Reserved
In this 1031 FAQ video, Jeff Peterson discusses what happens when a taxpayer dies during the course of a 1031 exchange. Watch more 1031 educational videos here.
Start Your 1031 Exchange: If you have questions about what happens when a taxpayer dies during an exchange, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2017 Copyright Jeffrey R. Peterson All Rights Reserved
In a 1031 exchange, you have to buy and receive like-kind property within the exchange period. There are all kinds of different property that can be exchanged. Real property is probably the easiest and most broadly construed like-kind requirement, in that a farm is like-kind with an industrial building. All kinds of real estate can easily and readily be exchanged.
Some assets, such as cooperatives raise an interesting question. In a cooperative you get a share of stock and typically a long-term lease. So is an interest in a cooperative like-kind to the sale of raw land?
You may have to delve into the local state law where the cooperative exists to see if it's treated at the state level as a real property interest, or as a personal property interest. It may go down to how that cooperative was formed at the very beginning of its creation. If the cooperative elects to be treated as personal property and taxed by the local taxing authority as personal property that could impact later acquisitions of it by persons wanting to do 1031 exchanges.
So particularly with cooperatives you want to look at the local laws and how that cooperative was created to determine if it is considered an interest in real estate, which would be like-kind to other real estate, or if it is treated more correctly as personal property which would not be like-kind.
Start Your 1031 Exchange: If you have questions about 1031 exchanges of cooperatives, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2017 Copyright Jeffrey R. Peterson All Rights Reserved
