1031 Exchange Tips for Accountants

Many accountants and CPAs work with clients who are interested in 1031 exchanges. In this article, we are going to offer up a few 1031 exchange tips for accountants to help their clients when considering like-kind exchanges.

The Complexities of a 1031 Exchange

Most accountants and CPAs are not experts in the realm of 1031 exchanges. Like-kind exchanges, though they may seem simple, can be incredibly complex as there are a litany of rules and regulations you need to abide by. Many CPAs have a basic understanding of how 1031 exchanges work and can explain the benefits to their clients, but they can’t execute a 1031 exchange on behalf of their clients. That’s where a qualified intermediary becomes invaluable.

Partner with a Qualified Intermediary

If you are an accountant or CPA and your client is asking about doing a 1031 exchange, it’s important to refer them to a qualified intermediary who understands the ins and outs of the 1031 exchange process. We partner with many accountants and CPAs to offer 1031 exchange help to their clients as needed.

CPEC1031 in Minneapolis

At CPEC1031, our like-kind exchange professionals make it a point to give every 1031 exchange the attention it deserves. No matter what type of property you’re looking to exchange, we can advise you throughout the process so you feel comfortable and informed. Give us a call today to learn more about the like-kind exchange process and to get your exchange up and running. Our main office is located in downtown Minneapolis, but we work with clients throughout the country.

•  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

The Benefits of Tenancy-in-Common Property

Being a Tenant in Common (TIC) gives the opportunity to investors to diversify their real estate investments as it is allows the ability to invest in more larger properties, rather than smaller properties. This also gives the potential of Increase in the Net Cash Flow. Ownership in Tenants in Common (TIC) properties gives the chance to increase cash flow, provides tax write-offs as well as property appreciation benefits. It is accomplished without a time commitment of active property management that otherwise is required, as the sole owner of the property.

Benefits of Tenancy-in-Common

Tenants in Common (TIC) include some of the following benefits:

• The Scope for an Investment for larger properties.

• Purchasing investment properties as tenants in common (TIC) allows an investor to invest in a large amount of properties similar to warehouses, shopping centers, industrial property, etc. which generally will cost a few million or more.

• Allowing the diversifying of Real Estate Investments.

The Nation’s Leading Real Estate Companies have a source of investment properties and acquires a fixed rate, non-recourse financing with terms for Tenants In Common (TIC) owners. With the Tenants In Common (TIC) property investment, may gain the access to select, national real estate companies, who look for the investment properties for you. The companies can be referred to as TIC Identification companies and they generally provides extensive due diligence on the part of investors. These real estate companies, the lenders and the security companies conduct an extensive due diligence on the investment properties being offered to Tenants in Common (TIC). During the time and resources necessary are being provided in a scale far larger than the most individual investors are capable.

Tenants In Common (TIC) investment property locators use professional property and asset management teams to allow Tenant In Common (TIC) investors to have the benefits of real estate ownership, without the day-to-day property management.

CPEC1031

At CPEC1031, we specialize in 1031 exchanges of all shapes and sizes. Our team has been facilitating exchanges for taxpayers around the United States for more than two decades. We are well-equipped to work with you through every step of your exchange – from start to finish. Reach out to our intermediaries today to see if your property qualifies for a 1031 exchange. Our main office is located in downtown Minneapolis, but we have additional locations across the country.

• 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 Delayed Exchange Explained

A 1031 delayed exchange represents a simple, strategic method for selling one qualified property and the subsequent acquisition of another property within a specific time frame for the deferral of capital gain taxes. Any property owner should consider a Delayed Exchange for the sale of their existing property. To do otherwise would necessitate the payment of capital gain taxes in amounts that can exceed 20% to 30%, depending on the appropriate combined federal and state tax rates.

It also provides exchangers with more flexibility and options in acquiring the replacement property than the simultaneous exchange. The delayed exchange begins when the exchanger's first relinquished property is sold and is completed when the last replacement property is acquired within the prescribed exchange period. There are two basic aspects to a Delayed Exchange. First, the purchase price of the Replacement Property must be equal to or greater than the sales price of the Relinquished Property. Secondly, all equity received from the sale of the Relinquished Property must be used to acquire the Replacement Property.

Several Steps in a 1031 Delayed Exchange

• STEP 1: List your exchange property for sale with a licensed real estate broker.

• STEP 2: Begin your search for replacement property.

• STEP 3: Open escrow on the exchange property being sold and complete the exchanged information sheet which was given to you.

• STEP 4: Provide written notification of the properties you wish to identify, not later than 45 days following close of escrow on the first property sold.

• STEP 5: Notify immediately as soon as you open escrow on your replacement property.

 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

Explaining The 1031 Identification Period & Exchange Period

There are two timelines that must be followed for a 1031 exchange to be successful.

Identification Period

This is the period during which the party selling the property must identify other replacement properties that he proposes to buy. It is scheduled as 45 days from the day of selling the relinquished property. The 45 days timeline has to be followed under any and every circumstances and is not extendable even if the 45th day falls on a Saturday, Sunday or any legal holiday.

Exchange Period

This is the period within which the person who has sold the relinquished property must receive the replacement property. It ends at 180 days after the date on which the person transfers the property relinquished or the due date for the person's tax return for the taxable year in which the transfer of the relinquished property occurred. According to 1031 exchange rule about timelines this 180 day timeline has to be adhered to under any circumstances and is not extendable even if the 180th day falls on a Saturday, Sunday or any legal holiday.

Property Exchanges Under Section 1031

Under section 1031 of the Internal Revenue Code, any US taxpayer is able to defer their capital gains taxes on the sale of real estate, provided they meet the requirements. The best way to ensure that you meet all of the necessary requirements is to consult with a 1031 exchange facilitator. At CPEC1031, our intermediaries have two decades of experience working with taxpayers on their exchanges. Contact us today to learn more about our services and get your exchange up and running!

• 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

Can You Exchange US Property for Foreign Property Using Section 1031?

The rules on foreign exchanges are set out in I.R.C. Section 1031(h).

Remember that in order to qualify for tax deferral, the exchange must be of like-kind property. In 1031(h) Congress made it so property located in the United States and property located outside the United States are NOT considered to be like kind.

1031 Exchanges Involving US Territories

The next Logical Question is what about US Territories such as: Guam, Puerto Rico and the U.S. Virgin Islands. Can You exchange US Property for property in the US Territories?

According to Private Letter Ruling 200040017, the answer appears to be a limited YES but the authority is ONLY to the U.S. Virgin Islands and ONLY if the USVI Replacement Property is held to produce income.  Guam and Puerto Rico may not qualify because the IRS has not ruled on specifically on them.  The Internal Revenue Code only defines the "United States" to include states and the District of Columbia.

It seems strange, but the Internal Revenue Service has ruled that property located in the U.S. Virgin Islands qualifies for 1031 like-kind exchange treatment, provided it produces income for U.S. citizens and has left out Guam and Puerto Rico.

Foreign to Foreign 1031 Exchanges (Involving Only Non US property)

Remember US taxpayers can be taxed on income earned anywhere even income earned outside of the US.

One interesting point to keep in mind is that foreign property can be exchanged for other foreign property so theoretically, a US tax payer could exchange Non-US property for other Non-US property.  Any US taxpayer’s investing in other counties who sells foreign property held for investment or for use in a trade or business and who then buys other like-kind foreign property that’s also held for a qualifying purpose, should be aware that foreign property can be considered to be of like-kind to other foreign property.  So yes You Can Exchange foreign property of for other foreign property!

• 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