How Title Closers & Qualified Intermediaries can Work Together on 1031 Exchanges

Many title closers run into clients who ask about 1031 exchanges. It’s important for closers to have some knowledge of the 1031 exchange process so that they can better help their clients prepare for the closing table. In this article, we’re going to talk about how title closers and qualified intermediaries can work together on 1031 exchanges.

Understand the Ultimate Goal of a 1031 Exchange

Remember that the ultimate goal of a 1031 exchange is to reinvest all of the sales proceeds from the relinquished property into the replacement property. The taxpayer should not pocket any of the net proceeds from the sale.

Pay Attention to 3 Specific Items

When it comes to 1031 exchanges, there are three specific items you want to keep an eye out for on the closing sheet – taxes, rent prorations, and security deposits. It’s important that the seller pay these items out of pocket in order to keep things clean from a 1031 perspective.

Work with a Qualified Intermediary

It’s best to consult with a qualified intermediary when dealing with a 1031 exchange to avoid any potential issues. At CPEC1031, we make the 1031 exchange process as easy as possible for you by taking care of everything. Our qualified intermediaries have been facilitating exchanges for over two decades and have the knowledge and experience to ensure the success of your exchange. Contact our team today to discuss your next 1031 exchange. You can find us at our primary office located in downtown Minneapolis, or at one of our satellite offices 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

How to Deal with 1031 Exchange Purchase Agreements

Recently, we had a client who was working on writing a Purchase Agreement for a piece of real estate and they wanted to know who to enter as the buyer for 1031 exchange purposes. Also, the PA stipulated that an initial deposit was to be submitted within a few days of an accepted offer - where should this payment come from? 

Shout it From the Mountaintops

Typically, the taxpayer/exchangor conducting the exchange enters into the Replacement Property purchase agreement in the same way that he/she owned the Relinquished Property and includes a 1031 cooperation clause in the purchase agreement.

It is a very prudent practice to ‘shout it from the mountaintops’ at every juncture that you intend to conduct a 1031 exchange. That way if there is ever a misstep, mistake or problem, everyone knows what you are trying to accomplish, and will give you the benefit of their understanding.

Here is some sample text that you may use or adapt for your purchase agreements:

When Buying: (Replacement Property)

The Seller herein acknowledges that it is the intention of the Buyer to complete an IRC Section 1031 Tax-Deferred Exchange and that the Buyer's rights under this Purchase Agreement shall be assigned to CPEC1031, for the purpose of completing such exchange. However, any warranties that may be expressed in this contract shall remain and be enforceable between the parties executing this document.  Seller agrees to cooperate with the Buyer and/or its assigns in a manner necessary to complete said exchange at no additional cost or liability. This Purchase Agreement is part of an integrated, interdependent, mutual and reciprocal plan intended to effectuate an exchange by Buyer of a like-kind real properties pursuant to and in accordance with the provisions of Section 1031 of the Internal Revenue Code.  The Seller shall execute and provide to Buyer prior to closing, an acknowledgement, that Seller has received written notice of the assignment of the Buyer’s rights under this Purchase Agreement to CPEC1031.

Contact a 1031 Exchange Professional

1031 exchanges of real estate are a great way to defer capital gains taxes. It’s important to ensure that you meet the requirements set out in IRC section 1031, however. The best way to ensure that is to work with a qualified intermediary who knows the process and can help advise you every step of the way. At CPEC1031 we have over two decades of experience facilitating exchanges of all shapes and sizes. Let us put our experience to work on your next 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

3 Myths & Misconceptions About 1031 Exchanges

There are a lot of myths and misconceptions out there about 1031 exchanges. We’re here to dispel these misconceptions! In this article, we are going to talk about a few myths and misconceptions about 1031 exchanges of real estate.

Myth: 1031 Exchanges are Only For Big Investors

1031 exchanges are available for all United States taxpayers to use. Section 1031 is written into the Internal Revenue Code and applies to all US taxpayers. You don’t have to be a huge real estate investor to utilize the 1031 exchange for your benefit.

Myth: All Property is Eligible for 1031 Exchange

Not all property is eligible for 1031 exchange treatment. Some property is excluded outright – such as personal property. That means only real estate can be considered for 1031 exchange. But not all real estate is eligible either. Any exchanged real estate must be like-kind and held for investment purposes, as opposed to personal use.

Myth: You can Only do a 1031 Exchange at Certain Times During the Year

1031 exchanges are available year round! However, you do need to be aware of your exchange time limits and be extra careful when an exchange crosses over into a new year (for tax reporting purposes).

Get Started with a 1031 Exchange Today

Get your 1031 exchange of real estate off the ground today by speaking with a qualified intermediary from CPEC1031. Our team has over two decades of experience facilitating like-kind exchanges in Minnesota and across the country. We have the skills and experience to make sure that your exchanges goes off without a hitch. Contact us today to learn more about our services, the exchange process, and how we can help. You can find us at our offices located in downtown Minneapolis.

• 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

1031 Exchange Tips for Financial Planners

Many financial planners have clients who may be interested in 1031 exchanges. In this article, we are going to offer up a few 1031 exchange tips for financial planners advising their clients on section 1031.

Keep Your Client’s Money Working for Them

The greatest thing about 1031 exchanges is that they let you defer capital gains taxes and keep your money working for you over time in a continued investment.

Work with a Qualified Intermediary

Working with a qualified intermediary is the best way to ensure the success of a 1031 exchange. A qualified intermediary knows the 1031 exchange process inside and out and can advise you (and your client) on the best course of action.

The More Prep Time, The Better!

If you have a client who is interested in pursuing a 1031 exchange of real estate, encourage them to start the process early. A little prep work goes a long way when it comes to 1031 exchanges. It’s a good idea to have at least an idea of what replacement property you want to exchange into before beginning the process. There is also paperwork that needs to be finalized for the closing table so it’s best to give as much lead time as possible.

Minnesota Qualified Intermediaries

CPEC1031 has been providing 1031 exchange services to clients throughout Minnesota and the United States for over two decades. We work with title closers, realtors, real estate attorneys, financial planners, and more! Our intermediaries can help you through the entire 1031 exchange process from start to finish, ensuring that you understand what’s happening every step of the way. Contact us today at our downtown Minneapolis offices or at one of our satellite offices located 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

Contract-for-Deed Property & Balloon Payoffs – 1031 Exchange or Qualified Opportunity Zone?

In this article, we are going to discuss what to do when selling a property on contract-for-deed and receiving balloon payoffs. In this situation, is it better to do a 1031 exchange or invest in a qualified opportunity zone?

Selling on a Contract-for-Deed

If you sold a property on a contract for deed and are now receiving the balloon payoff from the vendee, it is probably too late for you to do a 1031 exchange on this payment because equitable title was probably conveyed when you granted the contract for deed (probably more than 180 ago) to the vendee, so another option to consider is to re-invest the profit or gain into a Qualified Opportunity Zone investment.

CPEC1031

At CPEC1031, LLC, we help taxpayers facilitating exchanges under section 1031 of the Internal Revenue Code. Our professionals have over two decades of experience guiding people through the 1031 exchange process. We can prepare all of your 1031 documentation, advise you on replacement property, and more! Contact us today at our downtown Minneapolis office or at one of our satellite offices to learn more about the 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved