4 Tips for an Effective 1031 Exchange

Many taxpayers want to defer their capital gains taxes with a 1031 exchange, but don’t have a great concept of the rules that need to be met in a successful 1031 exchange. In this article, we are going to offer up several tips to avoid pitfalls and make sure your 1031 exchange is effective!

Before You Close, Sign Your Exchange Documents

Your exchange documents must be signed on or before the date that you sell your relinquished property. If you fail to sign these documents before selling your property, it’s too late to conduct an exchange.

Acquire the Replacement Property

The same taxpayer that sold the relinquished property needs to acquire the replacement property. Keep that in mind when setting up your exchange.

Be Careful with Expenses

There are a lot of potential pitfalls when it comes to paying expenses with exchange proceeds. In short, some expenses can be paid with the net proceeds, and others will result in taxable boot and only a partial 1031 exchange.

Make Security a Priority

Since this is a real estate transaction, it’s important to make sure your exchange funds are secured every step of the way. Make sure your intermediary is financially reputable.

Like-Kind Exchange Process Explained

If you’re confused about the like-kind exchange process, don’t hesitate to reach out to one of our 1031 exchange professionals. CPEC1031has been helping taxpayers throughout Minnesota and across the country with their exchanges for more than twenty years. We have the experience needed to ensure your exchange is successful. Contact us today to learn more about the exchange process and whether your property qualifies for capital gains tax deferral.

• 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Accounting Tips for a 1031 Exchange

There are many rules to keep in mind when it comes to 1031 exchanges of real property. In this article, we are going to offer up a few accounting tips to keep in mind for your next 1031 exchange of real estate.

3 Baseline Requirements

In terms of accounting, there are three baseline requirements you must satisfy in your 1031 exchange:

• Value. Your replacement property needs to be of equal or greater value compared to your relinquished property in order to cover all of your gain.

• Equity. All of your sales proceeds (equity) from the sale of your relinquished property need to be reinvested into your replacement property.

• Debt. You need to offset any debt relief with new debt to make sure that evens out. You can also invest additional cash to offset debt relief.

It’s also important to avoid seller-backed financing in a 1031 exchange. Such financing can trigger boot – which will be subject to capital gains tax. A qualified intermediary can help you navigate all of these rules and insulate you from receiving any gains or boot.

Exchanging into 1031 Property

At CPEC1031, we have over two decades of experience helping individuals exchange their property in 1031 transactions. We can walk you through all the steps in your exchange – from the sale of your relinquished property to the acquisition of your replacement property. Give us a call today to speak with one of our 1031 exchange intermediaries and get your like-kind exchange in the works! Our primary office is located in downtown Minneapolis, but we have offices around the United States.

• 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Exchanging 1031 Property Between Family Members

Here’s a common question we get a lot – “Can you 1031 exchange property between family members?” In other words, can you sell your relinquished property to your brother, or acquire your replacement property from your mother? In this article, we are going to talk about 1031 exchanges between family members.

Related Parties

When it comes to exchanges between related parties, there are several rules set in place. The first rule is that any property involved in a related party 1031 exchange must be held for at least two years after an exchange.

In addition to that, related party exchanges cannot be structured to avoid an imposition of tax. This is where things get a little gray because it can be difficult to differentiate between the right and wrong way to defer taxes when selling real estate. The IRS has fought several cases on this topic and won, making things even more murky.

Ultimately, if you have any questions about the legitimacy of a related party exchange, contact a qualified intermediary to discuss your situation.

Begin the 1031 Exchange Process

A 1031 exchange allows you to defer a hefty capital gains tax bill when selling real estate – but only if you satisfy all the requirements. That’s where a 1031 exchange intermediary can help – by making sure you’ve got all your bases covered for your 1031 exchange. The qualified intermediaries at CPEC1031 have over two decades of experience working with clients on their 1031 exchanges. Our intermediaries can help guide you through the steps of your exchange of real property. Contact us today at our downtown Minneapolis office to get the ball rolling.

• 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

Tips for Keeping Your 1031 Exchange Funds Safe & Sound

In a 1031 exchange it’s important that you don’t receive any of the sales proceeds of your relinquished property. But how do you rest easy knowing that your money is safe? In this article, we are going to offer a few tips for ensuring that your 1031 exchange funds are safe and sound.

Don’t Co-Mingle Funds

Don’t allow your funds to be co-mingled with any other taxpayer’s funds. Set up a separate, segregated escrow account for your 1031 exchange funds. Make sure that this account is only going to be used for your funds, and make sure you know the account number. Make sure that your funds are not co-mingled with your intermediary’s operating account. Knowing that your funds are in a separate, segregated bank account with no other funds will give you piece of mind.

Dual-Signature Account

Another way to further secure your funds is to lock your money down in a dual-signature account. This account would require two signatures in order to release any funds. The first required signature would be the qualified intermediary’s – since they are the primary holder of the account. The second authorization signature would be your own.

St. Paul 1031 Exchange Company

CPEC1031 has two decades of experience working on 1031 exchanges. Our qualified intermediaries can help you through each stage of your 1031 transaction – from the sale of your relinquished property to the acquisition of your replacement property. We bring to the table the skills and experience needed to ensure your transaction is a success. Contact us today to set up an appointment with one of our intermediaries and get started with your like-kind exchange today!

• 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Exchanges & Recaptured Depreciation

When you own real estate and make improvements to it, you can take a deduction on your tax return for the theoretical wear-and-tear on the property. This is one of the great benefits of owning real estate. In this article, we are going to talk about recaptured depreciation and 1031 exchanges.

Residential vs. Commercial Property

Residential rental property is depreciated over 27.5 years, and commercial property is depreciated over 39 years. That means that even if your property increases in value, you can take a deduction for the wear-and-tear on the property.

However, the disadvantage is that your basis is reduced incrementally each year. If you own an apartment building for 27 years, your property will have a zero basis on the improvements because you have run out the clock on your depreciation.

When you go to sell your property, all of your depreciation related gain is taxed at a higher rate than standard capital gains tax rates. Thankfully, you can do a 1031 exchange and defer all of those capital gains taxes.

1031 Exchange Professionals

Considering deferring taxes with a 1031 exchange? Be sure to consult with a 1031 exchange professional about the details of your exchange before you start the process. At CPEC1031, our intermediaries have over twenty years of experience facilitating exchanges of real estate. With offices located in downtown Minneapolis and around the country, we are well equipped to help you with your 1031 exchange no matter where your property is located. Contact us today to set up a time to speak with one of our 1031 exchange professionals about your transaction.

• 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.

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved