3 Property Identification Options in a 1031 Exchange

The 1031 proceeds of the sale must be re-invested in a like-kind asset within 180 days of the sale. Restrictions are imposed on the number of properties which can be identified as potential Replacement Properties within the first 45 days after closing. More than one potential replacement property can be identified as long as you satisfy one of these ALTERNATIVE rules:

• The Three-Property Rule - Up to three properties regardless of their market values. All identified properties are not required to be purchased to satisfy the exchange; only the amount needed to satisfy the value requirement. [This is the most commonly used rule]

• The 200% Rule - Any number of properties as long as the aggregate fair market value of all replacement properties does not exceed 200% of the aggregate Fair Market Value (FMV) of all of the relinquished properties as of the initial transfer date. All identified properties are not required to be purchased to satisfy the exchange; only the amount needed to satisfy the value requirement.

• The 95% Exception - Any number of replacement properties if the fair market value of the properties actually received by the end of the exchange period is at least 95% of the aggregate FMV of all the potential replacement properties identified. In other words, 95% (or all) of the properties identified must be purchased or the entire exchange is invalid.

NOTE: The replacement property received must be substantially the same as property identified within the 45-day limit described above.

For more information, please check out this video.

• 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 Your Qualified Intermediary Does Once the 1031 Exchange Process Begins

We’ve talked previously about the importance of involving a qualified intermediary early on in the 1031 exchange process and what you need to give them before starting your exchange. But what exactly does an intermediary do once your exchange has begun? In this article, we are going to explain what exactly your qualified intermediary does once the 1031 exchange process begins in earnest.

Document Preparation

Once your intermediary receives the sales and purchase agreements, and the title commitment, they go to work preparing your 1031 exchange documents. These documents will be tailor-made for your specific transaction. In order to prepare these documents, the qualified intermediary needs to figure out a number of details, including:

• How you hold title to the relinquished property

• The legal description of the property

• Any other parties involved in the transaction that need to be given written notice

Using this information, your intermediary will draw up your unique 1031 exchange documents and have them ready for closing.

As the exchange process progresses, your intermediary can also answer any questions you may have about the process, and help you identify the replacement property or properties that you wish to exchange into.

Set up Your 1031 Exchange & Start Deferring Taxes

CPEC1031 has over two decades of experience assisting taxpayers with 1031 exchanges of real estate. If you are considering the tax saving benefits of a 1031 exchange, let our intermediaries help you through the details of the exchange process. We will prepare your 1031 exchange documents, answer all of your questions and advise you on replacement property. Contact us today at our downtown Minneapolis office, or one of our other offices throughout the United States to speak with an intermediary about setting up 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

How 1031 Exchanges can be an Integral Part of Your Financial Planning

There are many factors to consider as you plan your future finances. A 1031 exchange can be a great addition to your financial planning tools to make sure you are financially secure in the long-term. In this article, we are going to talk about how 1031 exchanges of real estate can be an integral aspect of your financial planning.

Financial Planning Benefits of a 1031 Exchange

There are many financial planning benefits of doing a 1031 exchange. First and foremost, 1031 exchanges allow you to defer your capital gains taxes when you’re selling real property. Avoiding an unnecessary tax bill is always a good thing when it comes to planning for your financial future.

1031 exchanges also allow you to exchange out of and into different properties and industries. If you currently own a management intensive property like an apartment building, a 1031 exchange would allow you to exchange out of that and into a less management heavy property, which may be beneficial as you get on in years.

Talk to Your Financial Planner

It probably goes without saying that you should discuss all of this with your financial planner before making any decisions. They likely know your financial situation better than anyone, and can advise you as to your best options.

Twin Cities Real Estate Intermediaries

If you are looking to exchange your real estate in a 1031 exchange transaction, look no further than the Twin Cities qualified intermediaries at CPEC1031. We have been facilitating exchanges for clients for more than twenty years, and have the skills needed to guide you through each and every step of your 1031 exchange. Contact us today to speak with any intermediary about your exchange and get the ball rolling. Our main office is located in downtown Minneapolis, but we work with clients across Minnesota and the rest of 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 Soon Can You Purchase a New Property After Closing on a 1031 Exchanged Property?

1031 exchanges come with a lot of questions. Here's a recent question we got from a client: "How Soon Can I Purchase a New property After Closing on my 1031 Exchanged Property?" That's our topic for this article.

Replacement Property Closing

You can close on your new replacement properties any time after the old relinquished property is closed and fully funded…but it is best to schedule a little time between the closing. Sometimes the funds from the title company closing the relinquished property take a day or more to clear (if the buyer pays with a check), or they may not wire out on the same day if the closing occurs late in the day after the wire cut-off for the federal reserve. As a result, it's best to not schedule them back to back, unless the same title company is closing both the sale and the purchase.

It’s Murphy's law that "anything that can go wrong will go wrong," and oftentimes there is an unexpected delay on the relinquished property closing that will frustrate the seller of your replacement property if you schedule the purchase close to the day of the relinquished property closing

The best advice is to allow two to three days between the closing to allow a small cushion time for any unforeseen contingencies.

Like-Kind Property Exchanges in Minnesota

The qualified intermediaries at CPEC1031 have over twenty years of experience facilitating real property exchanges for clients in Minnesota and across the country. We can help you through every step of the 1031 exchange process – from selling your relinquished property to closing on your replacement property. Reach out to our intermediaries today and set up a time to chat at our downtown Minneapolis office.

• 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 is the Difference Between a 1031 Exchange & an Outright Sale?

When you have a piece of investment property that you want to sell, you basically have two options. You can choose to sell the property in a straight-forward transaction, or you can exchange the property under section 1031 of the Internal Revenue Code. How do you choose which option best suits your situation? In this article, we will discuss the difference between a 1031 exchange of real estate and an outright sale.

Outright Sale

In a straight-forward, outright sale, the biggest benefit is that you get to pocket your net proceeds from the sale. However, those sales proceeds will be subject to capital gains tax. When it comes to commercial real estate, this can add up to a pretty large capital gains tax bill. Thankfully, there is an alternative option that allows you to defer this capital gains tax bill – the 1031 exchange.

1031 Exchange

Instead of outright selling your property, you also have the option of exchanging it for another like-kind property. This process allows you to defer your capital gains taxes so long as you move your net proceeds into a suitable replacement property. This also has the added benefit of keeping your money working for you – building interest in a continued investment.

CPEC1031

1031 exchanges can be confusing for the uninitiated. That’s why it’s always a good idea to work with a qualified intermediary when embarking on an exchange of real estate. At CPEC1031 our intermediaries have twenty years of experience helping taxpayers defer capital gains taxes when selling real property. Contact us today to learn more about the benefits of a 1031 exchange and how we can help you through the process. You can reach us at our primary office 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