How to Revoke Identified Property in a 1031 Exchange

During the course of a 1031 exchange, some taxpayers will identify multiple properties during their identification period, only to change their minds later on. The question then becomes – can you revoke property that you have already identified in a 1031 exchange? In this article, we are going to explain how to revoke identified property in a 1031 exchange transaction.

Revoking Identified Property

When you are within the confines of your identification period (the first 45 days of your exchange period), you can freely identify and revoke identification of as many properties as you wish. In order to revoke an identification, you need to provide to your intermediary a written revocation with your signature. This has to happen within the 45 day identification period in order for the revocation to be valid.

Once you have passed your 45 day identification period, you are no longer able to identify any additional properties or revoke identification of any properties you have already identified. This underlines the importance of preparation in a 1031 exchange. It’s always a good idea to get ahead of the 8 ball and start plotting out your exchange early on in the process to avoid any potential issues.

1031 Exchanges for All!

1031 exchanges are available to all United States taxpayers who wish to defer their capital gains tax when selling real estate. The qualified intermediaries at CPEC1031 have two decades of experience facilitating exchanges of real estate and helping taxpayers defer their capital gains taxes. Reach out to us to set up a time to chat with one of our 1031 exchange intermediaries about the specifics of your real estate exchange and start saving money today! Our primary office is located in downtown Minneapolis but we serve clients across 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

What is the 1031 Exchange Incidental Property Rule?

There are a lot of rules that you have to follow when conducting a 1031 exchange of real estate. One such rule is the incidental property rule. In this article, we’re going to discuss the incidental property rule and what it means for in a 1031 exchange of real estate.

Incidental Property Rule

The incidental property rule is one of many rules that pertain to 1031 exchanges of real property. This particular rule relates to the 45 day replacement property identification rule that states that the taxpayer must identify in writing their replacement property within the first 45 days of their exchange period.

If this identified replacement property includes any incidental property that would normally be transferred with the property in a typical transaction, that incidental property does not need to be identified. One additional caveat is that the incidental property cannot be more than 15% of the value of the larger replacement property. As an example, consider an apartment complex that has laundry machines, and furniture. These items of incidental property would not need to be separately identified unless they total more than 15% of the value of the apartment complex.

Minnesota Like-Kind Exchanges of Real Property

CPEC1031 has two decades of experience facilitating like-kind exchanges of real property. We work with clients in Minnesota and around the country. A qualified intermediary works with the taxpayer conducting the exchange. We can answer any questions you might have, prepare all of your documents, and advise you throughout the process. Contact us today to get your exchange up and running!

• 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 Can you Buy Out a Partnership or LLC Interest to Complete a 1031 Exchange?

We get a lot of questions about 1031 exchanges involving partnership or LLC interests. Is it possible to buy out a partnership or LLC interest to complete a 1031 exchange? That’s our topic for this article.

Partnership & LLC Interests

Normally partnership or LLC interests (or interests in other business entities such as corporations) are not considered like-kind to real estate for the purposes of completing a 1031 tax-deferred exchange.

However, Private Letter Ruling No. 2008-07005 (PLR 200807005) says that receipt of 100% of a partnership, consolidating ownership in one taxpayer is the same as an acquisition of a "disregarded entity" and as such would be treated as an acquisition of the underlying real property interest for 1031 exchange purposes. 

CPEC1031

It’s always a good idea to discuss these situations with an experienced qualified intermediary who can walk you through the process to ensure success. At CPEC1031, LLC, we have been providing 1031 exchange services for the past twenty years. Let us help you defer taxes when selling real estate. You can find us at our main offices 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

The Deadlines that Govern 1031 Exchanges

There are many rules that you have to abide by when exchanging property in a 1031 transaction. In this article, we are going to talk about the deadlines that govern 1031 exchanges of real property.

1031 Exchange Deadlines

With any 1031 exchange of real estate, there are two deadlines in particular that you need to pay attention to. Your overall deadline to complete your exchange is 180 days, beginning when you sell your relinquished property. You have the first 45 days of that period to identify your replacement property in writing.

Exceptions to the Rule

There are a few exceptions to these timing rules. The biggest exception comes when your federal tax filing deadline falls within your 1031 exchange window. In this situation, you have until your tax filing deadline (April 15 for individuals, March 15 for businesses) to complete your exchange – rather than the full 180 days. This is because the IRS wants both your replacement property and your relinquished property reported on the same tax return. This is a common trap that many aren’t aware of, and it can potentially derail your exchange so you need to be cognizant of this rule. If you have timing issues, you can always file for an extension to give yourself a little more breathing room.

Qualified Intermediaries in Minnesota

1031 exchanges are a great tool that allows you to defer your capital gains tax when selling real estate. At CPEC1031, we help clients facilitate 1031 exchanges of real estate. Our qualified intermediaries can walk you through each step of your exchange – preparing your documents and answering all of your questions along the way. Contact us today at our downtown Minneapolis office to chat with a Minnesota qualified intermediary about your 1031 situation.

• 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

Can I Recover a Down Payment in a 1031 Exchange?

Many taxpayers conducting 1031 exchanges want to know if they can get any of their initial down payment back from their relinquished property. In this article, we are going to discuss whether or not you can recover your initial down payment on your relinquished property in a 1031 exchange.

Down Payments in a 1031 Exchange

The short answer to the question at hand is no. You cannot recoup your relinquished property down payment during a 1031 exchange without triggering taxable gain. It’s the IRS’ position that the first money out is theirs.

You are allowed to receive money during the course of a 1031 exchange. However, you have to remember that any funds received during the process will be treated as boot (i.e. taxable gain that you will be on the hook for). In this situation, you would not be able to defer 100% of your capital gains taxes and would only be able to complete a partial 1031 exchange. This situation is, of course, better than nothing. But ideally you want to defer all of your capital gains taxes and keep that money working for you over time – compounding wealth in a continued investment.

Defer Your Capital Gains Taxes

Defer everything you can on your next real estate sale with a 1031 exchange. With the right amount of prep work, you can keep your money working for you in a continued real estate investment, rather than cutting a check to Uncle Sam. If you’re interested in learning more about the 1031 exchange process, or you’d like to set up your very own exchange, contact the qualified intermediaries at CPEC1031 today. Our primary office is in downtown Minneapolis, but we work with clients across the state of Minnesota and 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