1031 Exchange Red Flags to Watch Out For

There’s a lot to keep track of when conducting a 1031 exchange. In this article, we are going to take a look at a few 1031 exchange red flags that should raise your eyebrow.

Red Flag – An Unqualified or Disqualified Intermediary

Working with a qualified intermediary is the best way to ensure the success of your 1031 exchange. However, choosing the right intermediary can be a difficult task. Some intermediaries are not particularly qualified – they may be inexperienced or lack the required skills for the task. On a similar note, there are some people who are outright disqualified from acting as your intermediary, such as your attorney, accountant, or employee.

Red Flag – Property Flipping

1031 exchange property must be held for investment or business purposes. Property flippers are not eligible to conduct 1031 exchanges on such property. Typically, 1031 exchange property must be held for a minimum of two years before selling again.

Red Flag – Not Trading Up on Your Replacement Property

When conducting a 1031 exchange, your replacement property needs to be greater in value, equity, and debt compared to your relinquished property. If you don’t trade up on your replacement property, you may not be able to defer 100% of your capital gains.

CPEC1031

If you’re interested in saving money in capital gains taxes when you sell real estate, a 1031 exchange is the tool you need! At CPEC1031, it’s our business to help investors defer their capital gains taxes through the use of the 1031 exchange. Over the course of our twenty years in business, we have helped countless taxpayers defer their gains under section 1031 of the Internal Revenue Code. We can help you too. Contact us today at our offices in downtown Minneapolis to learn more!

• 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

How to Tithe & Still Defer Your Gains in a 1031 Exchange

In a recent article, we discussed the challenges that occur at the intersection of tithing and 1031 exchanges. Despite these challenges, it is still possible to tithe and still defer your gains in a 1031 exchange.

So How can you Tithe and still Defer all the Gains?

If you have other funds available (other than the sales proceeds from the disposition of the relinquished property), you could re-invest 100% of the net sales proceeds from the disposition of the relinquished property into the replacement property… and then make an appropriate and equivalent charitable contribution with other funds.

Another option would be to complete the 1031 exchange by re-investing all the proceeds; and later in a separate subsequent closing transaction, refinance the replacement property and borrow then funds necessary for your church contribution.

Currently, charitable deductions made under Section 170(c) of the Internal Revenue Code are classified as below-the-line deductions. That means that these amounts are subtracted from one’s adjusted gross income, so they may not necessarily reduce your tax liability, particularly if you opt to take the standard deduction. If you do itemize your deductions, there is a limit on charitable cash-contributions capped at 60 percent of your adjusted gross income (computed without regard to net operating loss carrybacks).

The big take-away is the potential charitable deduction probably will not be as valuable (for federal tax purposes) as the full tax deferral that can be achieved through a successfully completed 1031 exchange.

Start Your Exchange with CPEC1031

Start your 1031 exchange today by contacting CPEC1031. Our qualified intermediaries have over two decades worth of experience facilitating like-kind exchanges under section 1031 of the Internal Revenue Code. Contact us today to learn more about our 1031 exchange services and how we can help you save money in capital gains taxes when selling real estate. Our primary office is located in the heart of downtown Minneapolis, but we also have 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

3 Potential Complications in a 1031 Exchange

Like-kind exchanges of real property can save you a lot of money in capital gains taxes…when they’re done right. But there are many ways in which 1031 exchanges can go wrong. In this article, we are going to discuss three potential complications that you might run into during a 1031 exchange of real estate.

Complication – Failing to Identify Your Replacement Property

After your sell your relinquished property, you have 45 days in which to identify in writing all the replacement properties into which you wish to exchange. If you fail to identify a property during this timeframe, you won’t be able to exchange into it. That’s why it’s best to look for appropriate replacement properties before you begin the process so you have some lined up.

Complication – Failing to Finish Your Exchange on Time

1031 exchanges play out along very strict time tables. Once you sell your relinquished property, you have only 180 days to complete your like-kind exchange. You have the first 45 days set aside to identify replacement property. If you fail to meet these deadlines, your exchange will fail and you won’t be able to defer your gains. The best way to avoid this is to plan ahead and give yourself plenty of prep time before beginning your exchange.

Complication – Failing to Go up in Value, Equity, and Debt

In a 1031 exchange, your replacement property needs to be higher in value, equity, and debt, than your relinquished property. If you fail to do this, you may only be able to partially defer your gains.

Minnesota 1031 Exchange Services

At CPEC1031, we facilitate 1031 exchanges of all shapes and sizes. Our qualified intermediaries have over two decades of experience working on real estate exchanges under section 1031 of the Internal Revenue Code. Contact our 1031 exchange professionals today to learn more about the process and get your exchange off the ground! You can find us at our primary office in downtown Minneapolis, or at one of our satellite offices located 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

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