The 1031 Exchange Guide to Real Estate

One of the best aspects of section 1031 is that it applies to nearly all investment real estate. As long as your property is held for the appropriate purposes (investment or business), you can exchange an apartment complex for a hotel, farmland for a retail building, or any other combination. In this article, we are going to look at a few types of real estate that are commonly exchanged under section 1031 of the Internal Revenue Code.

Apartment Buildings & Hotels

Apartment buildings are some of the most commonly exchanged properties under section 1031. If you own a duplex building and want to exchange up to a fourplex – you’re a great candidate for 1031 exchange.

Farmland

Many farmers are not aware that they can avail themselves of a 1031 exchange when selling their land. This can allow them to defer a big capital gains tax bill and reinvest their assets into a less management intensive property in their retirement years.

Retail

Retail buildings, storefronts, strip malls, and more can all qualify for 1031 exchange treatment as well.

Learn More About Section 1031

If you’d like to learn more about section 1031 of the Internal Revenue Code and how it can help you save money on capital gains taxes, contact CPEC1031 today. Our qualified intermediaries have over two decades of experience facilitating exchanges of real property across the United States. We can help guide you through the entire 1031 exchange process and make sure you feel comfortable every step of the way! Contact us at our downtown Minneapolis office to set up a time to meet.

• 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

Section 1031 is a Very Powerful Provision!

It says, "no gain... is recognized" on the transfer of QUALIFIED 1031 PROPERTY, which is property that has been held for "use in a trade or business" or for "investment purposes" that is exchanged for new like-kind business or investment property.

This means you can structure your sale to be tax-free - by indefinitely deferring your capital gains tax!

Like-Kind Property

Notice that the regulation says that the exchange has to be of "Like-Kind" property. Properties are considered to be like-kind, if they are of the same nature or character, even if they differ in grade or quality. This is very broadly applied to nearly all real property in the United States.

For example, you can exchange a farm for an apartment building - and yes, they are both considered like-kind because they are both REAL ESTATE. Likewise, industrial or commercial real-property can be exchanged for residential real-property. Note that real property in the United States and real property outside the United States are not considered like-kind.

Vacation homes, second homes and property that is used primarily for personal-use, is also EXCLUDED from Section 1031.

As you can see - a 1031 exchange is extremely useful for the right type of property - but can be somewhat complicated - so be sure utilize a qualified intermediary to ensure the success of your tax-free transfer.

Contact a Qualified Intermediary About Your 1031 Exchange

Are you looking to exchange your investment real estate in a like-kind transaction in order to save money in capital gains taxes? If so, you’ve come to the right place. At CPEC1031 has over twenty years of experience facilitating exchanges of all kinds under section 1031 of the Internal Revenue Code. We have the resources and expertise to help you through the process. Contact us today to learn more about the 1031 exchange process and how we can help!

• 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 You Can Still Do Personal Property 1031 Exchanges in Some States

As we’ve discussed before, the Tax Cuts & Jobs Act effectively removed items of personal property from 1031 exchange treatment. But there are still some cases in which a personal property exchange can be used at the state level. In this article, we are going to explain how the personal property exchange can still be a viable option for people in certain states.

Personal Property Under Section 1031

Personal property exchanges were really hot before the Tax Cuts & Jobs Act was written into law. But people are still able to do personal property exchanges in some fashion.

For federal tax purposes, personal property is no longer eligible under section 1031. That said, some states have decoupled from certain aspects of federal tax law and there are some states that would technically still allow personal property exchanges for state tax deferral purposes. When you think about it, even the ability to defer your state taxes can be significant, especially in high tax states like Minnesota and California. This is true if you’re buying and selling an individual piece of personal property – say an aircraft – but it’s even more meaningful if you’re an owner of a fleet of aircraft.

Like-Kind Exchange Intermediaries

1031 exchanges are the best way to defer capital gains taxes on the sale of your investment or business real estate. Give our team of 1031 exchange professionals a call today to learn more about the process and how we can help. Our home base is in downtown Minneapolis but we have satellite offices around the United States. No matter where your property is located, we can help you through the details of your 1031 exchange.

• 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

Common Questions About 1031 Exchanges & "Flipped" Property

Real estate investors have a lot of questions when it comes to 1031 exchanges and flipped property. In this article, we’re going to discuss some of the IRS regulations surrounding this topic.

According to the IRS

According to the instructions for IRS form 8824, Section 1031 doesn't apply to exchanges of real property held “primarily for sale,” so flip properties probably don’t fit the definition of “held for productive use in a trade or business or for investment.” 

See also IRS PUB 544 which states: “the nonrecognition rules for like-kind exchanges apply only to exchanges of real property not held primarily for sale.”

 26 U.S. Code § 1031.Exchange of real property held for productive use or investment

(a) Nonrecognition of gain or loss from exchanges solely in kind

(1) In general

No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for realproperty of like kind which is to be held either for productive use in a trade or business or for investment.

But

1031 (a)(2) says that:

(2) Exception for real property held for sale

This subsection shall not apply to any exchange of real property held primarily for sale.

CPEC1031

Exchanging property under section 1031 can be a complicated process, but we are here to help! The qualified intermediaries at CPEC1031 have over two decades of experience helping clients through 1031 exchanges. If you want to save money in capital gains taxes when selling investment property, a like-kind exchange may be right for you. Give us a call today to learn more about our 1031 exchange services and how we can help you through the 1031 exchange process.

• 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 Avoid Common Missteps During the 1031 Exchange Process

The 1031 exchange process can be complex, and less experienced taxpayers can easily mess things up if they aren’t working with a professional. In this article, we are going to discuss how to avoid some of the most common missteps during the 1031 exchange process.

Make Sure Your Property Qualifies

Before you do anything, it’s important to determine if your property even qualifies for 1031 exchange treatment. First off, your property needs to be real estate that’s used primarily for investment or business purposes. No personal property or real estate used primarily for personal use allowed.

Hit Your Deadlines

Section 1031 outlines very strict deadlines for any taxpayer conducting a like-kind exchange. You need to complete your exchange within 180 days, and you have the first 45 of those days to identify your replacement property.

Don’t Wait Until the Last Minute

When you don’t give yourself (or your intermediary) enough time, mistakes are more likely to occur. Contact your qualified intermediary well before you want to sell your relinquished property, and keep in constant communication with them throughout the identification process. That way you will be fully prepared for the closing table.

Qualified Intermediaries in Minnesota

Of course, the best way to avoid all of these missteps is to work with a skilled intermediary throughout your exchange. CPEC1031 employs qualified intermediaries in the state of Minnesota who can help you facilitate your next 1031 exchange transaction. Like-kind exchanges should be considered by anyone looking to sell a piece of investment real estate because they allow you to defer your capital gains taxes on the sale. This can help you avoid a huge tax bill. Contact our 1031 exchange professionals today to learn more about the 1031 exchange process and how we can help you through the steps of your exchange.

• 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