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.
© 2019 Copyright Jeffrey R. Peterson All Rights Reserved
Tips for Using Reverse Exchanges with Multi-Family Property
In this video, we offer some tips for using reverse 1031 exchanges with multi-family 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.
© 2019 Copyright Jeffrey R. Peterson All Rights Reserved
How to Approach Related Party 1031 Exchanges
Many taxpayers have questions about related-party 1031 exchange transactions. The IRS has imposed special rules that limit your ability to do like-kind exchanges with related parties. In particular, when you’re buying a replacement property, you have to be careful so that your transaction isn't deemed to be motivated by an intention to avoid the imposition of tax. It’s often hard to discern any difference between the legal intention to defer taxes and the improper intention of avoiding the imposition of tax.
But if both the party that’s acquiring the property and the party that’s selling the property aren’t paying any taxes, that might be a perfect storm for the IRS to be worried about.
What is a Related Party?
Your parents, your children, ancestors, and anyone to whom you’re related by blood or familial relationship are considered related parties. In addition to that, you can be a related party with people that you’re in business with (partners, people that are in corporations or trusts with you, etc.).
Looking at your specific situation and working with your tax advisor is essential if you’re considering doing a related party exchange. Many people think that all they have to do is hold the property for two years and they’ll have satisfied the related party rules. But there's more to it than that.
You also can't have an intention to avoid the imposition of the tax. The IRS has litigated cases that have further muddied the waters and made it hard to navigate what is and is not appropriate. Anyone considering buying a property from a related party should do so with their eyes wide open and work with their accountant and tax advisor to make sure that they're doing it right. If you want to avoid all of these hassles, just don't buy from a related party.
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.
© 2019 Copyright Jeffrey R. Peterson All Rights Reserved
Issues to Be Aware of with 1031 Exchanges & Seller Financing
If you're doing a 1031 exchange, you want to be able to take all of your equity (or net proceeds) in the relinquished property and reinvest those proceeds into the replacement property.
If your buyer of the relinquished property asks you to finance a portion of their purchase, you may want to do that just to get the deal done. But if you're taking a portion of your proceeds from the sale and loaning it back to the buyer, that's going to hamper your ability to move all of your equity and redeploy into the replacement property.
An Easy Workaround
One easy workaround is to loan the money to the buyer out of your own pocket rather than out of the proceeds of the sale.
The old expression is: “cash is king.” So if you've got the cash to loan to your buyer – great! That's a good workaround. If you don't have the cash and you want to maximize the tax efficiencies of your exchange, tell the buyer that you want cash on the barrelhead - that you don't want to be their banker, you just want to sell them the property.
If you can get the buyer to pay you cash and finance the property with a traditional loan or from other sources, so much the better. Keep your exchange simple and make it as easy for you to redeploy all of your equity into that bigger and better like-kind replacement property, and do so in in a way that allows you to compound and build your wealth without the drag of unnecessary recognition of taxes.
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.
© 2019 Copyright Jeffrey R. Peterson All Rights Reserved
Opportunity Zone Glossary of Terms
Opportunity zones are new tax incentives created by the Tax Cuts & Jobs Act. But since they are so new, many people are still wrapping their heads around them. In this article, we are going to define a few terms and acronyms that relate to opportunity zones.
QOZ – Qualified Opportunity Zone
A qualified opportunity zone is a designated area in which business must be conducted for the opportunity zone tax benefits to apply.
QOF – Qualified Opportunity Fund
A qualified opportunity fund is a partnership, C corporation, or S corporation in which a taxpayer can invest in and defer eligible gain on the sale of property.
QOZP – Qualified Opportunity Zone Property
A qualified opportunity zone property can be a qualified opportunity zone business property (QOZB) or an interest in a subsidiary that conducts qualified opportunity zone business.
QOZB – Qualified Opportunity Zone Business
A qualified opportunity zone business is a subsidiary that conducts qualified opportunity zone business and must meet the definition of a QOZB in order to do so.
Defer Your Taxes with a Like-Kind Exchange
When you’re embarking on a 1031 exchange, it’s important to have a qualified intermediary by your side to help facilitate the transaction. Our intermediaries have twenty years of experience that we can put to work for you. Reach out to our qualified intermediaries now to learn about how a like-kind exchange can save you money on capital gains taxes. Our main office is located in downtown Minneapolis (in the US Bank building) and we provide exchange services 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.
© 2019 Copyright Jeffrey R. Peterson All Rights Reserved