When to Consider a 1031 Exchange Instead of a Straight-Forward Sale

When you’re getting ready to dispose of a piece of real estate, it can be difficult to choose how to proceed. In this article, we are going to discuss when you should consider doing a 1031 exchange of real estate rather than an outright sale.

1031 Exchange vs. Straight-Forward Sale

First, let’s talk about the difference between a 1031 exchange and a straight-forward sale. In a typical, straight-forward sale, the taxpayer sells their property, pockets the sales proceeds, and is responsible for paying capital gains taxes on the sale. With a 1031 exchange, the taxpayer sells the property, but instead of pocketing the proceeds – they reinvest that capital into a replacement property. In doing so, they are able to defer 100% of their capital gains tax liability.

Making a Decision

If you are in dire need of liquidity, a straight-forward sale is probably your best bet as you are not allowed to pocket any of the gains in a 1031 exchange. However, a 1031 exchange is the most tax-advantageous way of selling real estate. If you don’t absolutely need the sales proceeds, it’s worth it to consider a like-kind exchange due to the immense tax savings.

Defer Your Taxes when Selling Real Estate

The qualified intermediaries at CPEC1031 have over twenty years of experience in the like-kind exchange industry. We have the knowledge and the skills to ensure that your 1031 exchange is successful. Contact our 1031 exchange professionals today to learn more about how a 1031 exchange can help you defer capital gains taxes. Our primary office is located in downtown Minneapolis. We also have satellite offices throughout 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

The Tax Advantages of Conducting a 1031 Exchange

There are many benefits of conducting a 1031 exchange. Today, we’d like to talk specifically about how a 1031 exchange is useful from a tax perspective. In this article, we are going to discuss the numerous tax advantages of conducting a 1031 exchange of real estate.

Defer Your Capital Gains Taxes

The 1031 exchange was built on the idea of deferring capital gains taxes when selling property. In 2020, taxpayers are able to defer 100% of their capital gains tax when selling real estate, as long as they meet all the requirements set out in section 1031 of the Internal Revenue Code. Depending on the property involved, this can add up to a huge tax savings.

Keep Your Money Working

Ultimately, deferring your capital gains taxes means that you get to keep your money working hard for you over time. Instead of giving that money to the government, you can reinvest it into a replacement property and continue compounding interest over time. The economy at large benefits too, as 1031 exchanges encourage investment in the real estate market.

Thinking of Doing a 1031 Exchange? Act Now!

At CPEC1031, we have over two decades of experience in the 1031 exchange industry. Our qualified intermediaries can guide you through the entire like-kind exchange process and advise you every step of the way. Contact us today to learn more about the 1031 exchange services we offer and how we can help you with your next like-kind exchange. Find us at our downtown Minneapolis office, or at one of our numerous satellite offices around 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

Tax Savvy Investing with 1031 Exchanges

A 1031 Exchange allows us to sell a piece of investment, trade or business property, buy a new property, and defer the gain or profit from the sale (not owe taxes on the sale immediately). If you eventually sell the new piece of property, you would owe taxes at that time. Generally, all gains and losses on sales of real estate are taxable, but an exception lies within a 1031 exchange where the property sold is traded or "exchanged" for the same or link kind property. The new property is seen as a continuation of the original investment, so taxes are not due at the time of the sale.

Many people believe that tax-deferred exchanges are only for professional investors and huge corporations but this is simply not true. The main strategy is to purchase a rental home below market value, rent it for a year, sell it, and buy two rental properties for your own good. If you do this several times, there is a tendency that the IRS may take view that you are not a long term investor and disallow such exchanges. When you are ready to do a tax-deferred exchange, you will need a qualified intermediary, a CPA, or an attorney and you should always get professionals advice.

The 1031 Tax-deferred exchange is a great way to maximize your wealth. By keeping your investments growing without immediately paying taxes, you can do wonders for your net-worth. Remember, if you are planning to do a tax-deferred exchange, you really need to ask for advice from a professional that handles these transactions on a regular basis.

Get Your 1031 Exchange Started

Get your 1031 exchange started today by contacting CPEC1031. Our team of skilled qualified intermediaries has been facilitating like-kind exchanges of real estate for over two decades. We bring that level of experience to the table with each exchange we facilitate. Reach out to our team of 1031 exchange professionals today to learn more about the process and how we can help with your next transaction. You can find us at our primary office in downtown Minneapolis, or at one of our satellite offices around 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

Is There a Limit to the Number of 1031 Exchanges a Person Can Do?

Many of our clients wonder if there is a limit to the number of 1031 exchanges they can do. That’s our topic for this article. Read on to learn more!

1031 Exchange Limitations

There is no limit to the number of 1031 exchanges a US taxpayer engages in. A person can conduct as many 1031 exchanges of real estate as they so choose, as long as they abide by all the rules laid out in section 1031 of the Internal Revenue Code.

It’s important to hammer that point home - you need to make sure that you are meeting all the necessary requirements for every 1031 exchange you conduct. You need to ensure that your property is like-kind. You need to ensure that your property is held for business (not personal) use. You need to make sure that you go up in value, equity, and debt when exchanging into your replacement property.

Exchange Your Property & Save on Capital Gains Taxes

Exchange your real property today with a 1031 exchange and save on capital gains taxes! A 1031 exchange allows taxpayers to reinvest their net proceeds from a real estate sale and defer capital gains taxes so long as they reinvest the proceeds into a replacement property. This has the added benefit of keeping your money working for you in a continuing investment. Our qualified intermediaries are well-equipped to help you through the entire exchange process. Contact us today at our offices in downtown Minneapolis to learn more about 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

What to Know About Tithing & 1031 Exchanges

A tithe is really an Old Testament term and religious tradition. Early Israelites followed the law of tithing. For example, by giving every tenth animal that passed under the shepherd’s rod. Leviticus 27:28-32, Genesis 28:20-22, Numbers 18:25, 26 and “Render to Caesar the things that are Caesar’s; and to God the things that are God’s” Matthew 23:13.

In present-day, this tradition of tithing is often accomplished by church members giving one-tenth of their incomes to the Lord through their church.

In a 1031 exchange, however, the general tax rule is that ALL the net sales proceeds from the disposition of the relinquished property should be re-invested into the new replacement property; and the replacement property should be of equal or more value than the relinquished property.

The Issue with Tithes and 1031 Exchanges

What if you take 10% of the proceeds, and do not use these funds for the purchase of the new replacement property…so that you can make the Lord ’s offering as a contribution to a religious organization? Will that impact the success of the 1031 exchange?

Consider Your Boot

To answer that question, we have to take a look at your boot. No, not your footwear! For 1031 exchange purposes, boot is any non-like kind property that is received by the taxpayer in the course of conducting a 1031 exchange.  To the extent that you receive boot, you will recognize gains (on the value of the boot) and may only partially defer the recognition of any more gains that you have by re-investing the remaining proceeds into your replacement property. Tithes would essentially fall into this category and result in a reduced tax deferral.

Careful tax-planning and timing may be required so as you don’t unnecessarily render unto Caesar, while rendering unto the Lord.

• 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved