What is a Partial 1031 Exchange?

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 CPEC1031, 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!

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

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

What is a Simultaneous 1031 Exchange?

1031 like-kind exchanges come in several different forms. One particular type is called the simultaneous exchange. In this article, we are going to talk about simultaneous 1031 exchanges – what they are and when they can be useful.

Simultaneous 1031 Exchanges

A simultaneous exchange is a concurrent 1031 exchange in which a taxpayer disposes of their relinquished property and immediately acquires the new replacement property. This is also commonly referred to as a drop and swap exchange.

However, most 1031 exchanges are not structured as simultaneous exchanges, but rather as delayed exchanges. This is simply because most taxpayers are not able to line up the selling of their relinquished property and the purchase of their replacement property. A delayed exchange allows you to sell your relinquished property, and then acquire your new replacement property at some point over the following 180 days (the first 45 of which are set aside for identification of the new replacement property). This gives taxpayers a lot more flexibility, which is why it’s the preferred method for exchanging real estate under section 1031.

1031 Exchange Accommodator

At CPEC1031, our 1031 exchange accommodators have decades of experience helping taxpayers with their like-kind exchanges of real property. Whether you’re doing a forward exchange, a reverse exchange, or a build-to-suit construction exchange we have the knowledge and experience to walk you through the process and help you defer your capital gains taxes. With offices around the country, we facilitate 1031 exchanges across the United States. Contact us today at our Minneapolis office to set up an appointment with one of our qualified intermediaries.

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

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved

The Difference Between Tax Free & Tax Deferred

Many people think that a 1031 exchange is “tax free.” This is not true. What a 1031 exchange offers is tax deferral. But what exactly does that mean? In this article, we are going to talk about the difference between tax free and tax deferred when it comes to a 1031 exchange.

Is a 1031 Exchange Tax Free?

To the question at hand – is a 1031 exchange completely tax free? No. 1031 exchanges are not tax free in the sense that you never have to pay taxes on the capital gains from your sale. Instead, 1031 exchanges allow you to defer your capital gains taxes on the sale of real property. There is an important distinction we need to make here between the terms “tax free” and “tax deferred.” Tax free implies that you never have to pay taxes. That does not describe a 1031 exchange. Tax deferral implies that you are still responsible for the taxes in question, but aren’t responsible for paying them until some point in the future.

Deferring Taxes Indefinitely

Although a 1031 exchange is not tax free, with a good strategy and enough foresight, you can potentially defer your taxes indefinitely by continually exchanging into new replacement property over time.

MN 1031 Exchange

Contact a 1031 exchange qualified intermediary today to learn how to defer your capital gains taxes on the sale of real estate. At CPEC1031, our qualified intermediaries have decades of experience facilitating exchanges of all shapes and sizes. Contact our team of qualified intermediaries today to set up an appointment over the phone or in person at our downtown Minneapolis office.

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

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved

An Update on 1031 Exchanges & the GOP Tax Bill

There are a lot of questions surrounding the new GOP tax bill, which could be up for a vote as soon as this week. In this article, we are going to talk briefly about the current status of the new tax bill and its potential impact on like-kind exchanges.

The GOP Tax Bill

Right now, the House and Senate are working to reconcile the differences between the two bills that passed each chamber earlier this year. Things are moving at a fast pace, as the GOP hopes to have a vote by Christmas.

Impact on Section 1031

So what does the new bill say about section 1031 and like-kind exchanges? The good news is that both versions of the bill (from the House and Senate) keep the like-kind real estate exchange intact. That means taxpayers will still be able to defer their taxes on the sale of real property moving forward.

However, both bills eliminate the personal property 1031 exchange. That means exchanges of aircraft, business equipment, livestock, artwork, coins, precious metals, and all other forms of personal property would be excluded from 1031 exchange treatment. This is a big change to section 1031 and the Like-Kind Exchange Coalition has called for a restoration of personal property exchanges to the bill. This has, so far, proved unsuccessful.

Minnesota Qualified Intermediary

Since the bill is still being debated, it’s a little too early to say with certainty what will and will not happen. That being said, if you have any questions about this new tax bill and its potential impact on the like-kind exchange, don’t hesitate to reach out to a qualified intermediary with your questions.

• Start Your Exchange: If you have questions about how the GOP tax bill might impact your 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

The Deadlines of a Delayed 1031 Exchange

The delayed 1031 exchange is one of the most popular types of like-kind exchanges. As with any type of real estate exchange, you have to be aware of the deadlines and regulations required. In this article, we are going to discuss some of the deadlines you need to hit in order to execute a successful delayed exchange of 1031 property.

Delayed 1031 Exchange

A delayed 1031 exchange is perhaps the most common type of real estate exchange. It occurs when a taxpayer sells their relinquished property on one date, and then exchanges into their replacement property on another date.

45 Day / 180 Day Deadlines

In a delayed 1031 exchange (or any like-kind exchange, for that matter), there are certain time limits you need to abide by in order to complete a successful exchange. The most important time limit to remember is 180 days. After selling your relinquished property, you have 180 days total to complete your 1031 exchange. If your exchange goes beyond the 180th day, it will fail.

Furthermore, you have the first 45 of those 180 days to identify your replacement property or properties in writing.

1031 Qualified Intermediaries

If you are considering a delayed exchange, it is absolutely essential that you are aware of the deadlines and other requirements set out in the Internal Revenue Code.  This is where a qualified intermediary can be extremely helpful. There are many benefits to hiring a qualified intermediary at the outset of your 1031 exchange. An intermediary acts as an advisor and a facilitator throughout your exchange, and can insulate you from receiving any of the net proceeds from the sale of your relinquished property. Contact us today at our downtown Minneapolis office to discuss the ins and outs of your 1031 exchange.

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

Defer the tax. Maximize your gain.

© 2017 Copyright Jeffrey R. Peterson All Rights Reserved