Are 1031 Exchanges More Difficult After the New Tax Law Passed?

People have a lot of questions about 1031 exchanges as they relate to the new tax bill that was passed late last year and went into effect the first of this year. In this article, we are going to delve into whether 1031 exchanges are more difficult now that the new tax law has gone into effect.

Exchanging Real Estate

The new tax law preserved 1031 real estate exchanges, meaning they are still a viable option for investors. In that sense, like-kind exchanges of real estate are no more difficult now than they were before the passage of the new tax bill.

Personal Property Exchanges

1031 exchanges of personal property, however, are a different story. The new tax law that went into effect on January 1, 2018 excludes personal property outright from 1031 exchange treatment. So personal property exchanges are a lot more difficult since the new tax law went into effects – that is to say, impossible.

Intermediaries for 1031 Exchanges

If you are considering a like-kind exchange of real estate, your first step should be to contact a qualified intermediary who can get you started with the process. A 1031 intermediary acts as a sort of guide throughout the course of your exchange. They will advise you, prepare your necessary exchange documents, and answer all of your questions that arise. At CPEC1031, we have been helping investors of all sizes with their real estate exchanges for more than twenty years. Contact our Minnesota qualified intermediaries today to set up a time to chat about your 1031 real estate exchange.

• Start Your Exchange: If you have questions about 1031 exchanges and the new tax law, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

What You Need to Know About 1031 Parking Exchanges

There are numerous types of 1031 exchanges. Finding the right one for your situation is important, but it can be difficult if you aren’t familiar with the options available to you. This article is all about the 1031 parking exchange. We’ll discuss what a parking exchange is and when it can be useful in deferring capital gains taxes on the sale of real estate.

What is a Parking Exchange?

A parking exchange is essentially another name for a reverse exchange, in which the taxpayer “parks” their replacement property with an EAT (Exchange Accommodation Titleholder) while they wait for their exchange to complete. In a reverse exchange, the taxpayer acquires their replacement property before selling their relinquished property. However, the exchangor is not allowed to simultaneously hold title to both their relinquished property and their replacement property. This isn’t an issue in a typical forward exchange, but it does become an issue with a reverse exchange. The solution is to park the replacement property with the EAT until the taxpayer is ready to finish their exchange and sell the relinquished property.

Get Started with Your 1031 Exchange

To get started with your 1031 real estate exchange, contact a qualified intermediary today. The team of intermediaries at CPEC1031 has been providing 1031 exchange services to clients in Minnesota and across the country for more than twenty years. We have the knowledge and the expertise needed to ensure that your exchange is successful. Contact us today at our downtown Minneapolis office to set up a time to chat with one of our 1031 exchange specialists.

• Start Your Exchange: If you have questions about 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

1031 Exchanges of Sports Team Player Trades

The new tax law has had a lot of implications on 1031 exchanges.  In this article, we are going to discuss 1031 exchanges of sports team player contracts and the implications of the new tax law.

Player Trades

When a sports team trades a player, they are essentially selling the player’s contract, which is viewed as a business asset. In the past, many teams have sold these contracts under section 1031 of the Internal Revenue Code, which allowed them to defer capital gains taxes on such a sale so long as they reinvested any proceeds into like-kind property (i.e. another player’s contract). But the new tax law changes that.

New Tax Law

The new tax law that went into effect January, 2018 limits 1031 exchanges to real estate. Items of personal property, which historically had been allowed under section 1031, are now excluded from 1031 treatment. That means team player contracts would no longer be eligible for 1031 exchange, and any teams would have to recognize capital gains when trading players (and thus selling their contracts). The big question is whether this will discourage teams for trading as many players moving forward.

Qualified Intermediaries for 1031 Exchanges

If you are considering a 1031 exchange tax deferral, it’s in your best interest to speak with a qualified intermediary before beginning the exchange process. Qualified intermediaries are trained 1031 professionals who understand the inner workings of like-kind exchanges. They can help advise you throughout your exchange and prepare your required documents for closing. At CPEC1031, we have been helping taxpayers with their 1031 exchanges for over two decades. Contact us today at our downtown Minneapolis office to set up a time to chat with our intermediaries.

• Start Your Exchange: If you have questions about 1031 exchanges of sports team player contracts, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Partial vs. Complete 1031 Exchanges

1031 exchanges can be broken down into several categories – forward, reverse, complete, partial, etc. In this article, we are going to discuss the partial 1031 exchange vs. the complete 1031 exchange. We will walk through the differences between each type of 1031 exchange.

Complete 1031 Exchange

A complete 1031 exchange is an exchange in which the taxpayer conducting the exchange defers all of their capital gains taxes on the sale of their real property. This is what most people picture when they think of 1031 exchanges.

Partial 1031 Exchange

A partial 1031 exchange is an exchange in which the taxpayer conducting the exchange recognizes some gain, typically as the result of receiving boot.

In most 1031 situations, ideally you want to strive for complete tax deferral. But that’s not always possible. Whether due to a mistake or some unforeseen issue, sometimes taxpayers receive boot and are not able to defer all of their capital gains taxes when selling real estate. In those situations, it’s better to take the partial tax deferral rather than none at all.

Defer Your Capital Gains

CPEC1031 specializes in facilitating 1031 exchanges for investors of all sizes. A 1031 exchange is a great way to defer your capital gains tax when selling real estate. It allows you to keep your money working for you, compounding and building over time. Contact us today to speak with a qualified intermediary and see if your property qualifies for a 1031 exchange. Our primary office is located in downtown Minneapolis, but we work with clients on their 1031 exchanges across the United States.

• Start Your Exchange: If you have questions about partial vs. complete 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

Do You Have to Reinvest All Net Proceeds into Your 1031 Replacement Property?

In a 1031 exchange, does the full amount of proceeds have to be invested into the replacement property including the original down payment amount? For example, if you put $45K down, but will profit $100K - does all $100K have to roll into the replacement property or just the $65K profit? 

3 Rules of Thumb to Follow

This is a common 1031 exchange question. In this scenario, you would probably want to re-invest all of the proceeds into the new Replacement Property because the first cash-out is attributed to gain from an accounting perspective.

There are three general rules of thumb to quickly see if you will defer all of the recognition of gain.

1. Typically, you will acquire replacement property that is “up or equal” in Value* (price); {*net of sales commissions and customary transactional expenses}.

2. You will roll over all of your Equity (net proceeds) from the relinquished property into your replacement property.

3. And to the extent that you were relieved of liabilities and DEBT, such as mortgages on your old relinquished property, the debt relief is offset by (1) new liabilities or mortgages taken on in conjunction with your purchase of the replacement property; OR (2) by investing additional cash in the replacement property equal to the amount of liabilities and debts that were discharged.

You can have a partial tax deferral if you miss these general benchmarks.

For more information, check out the video below:

Be sure to check with your CPA about these general rules of thumb, to make sure they apply to your specific situation.

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

Defer the tax. Maximize your gain.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved