Best Practices for Identifying Property in a 1031 Exchange

Properly identifying replacement property is often the most challenging part of a 1031 exchange. In this article, we are going to discuss some best practices for identifying property in a 1031 exchange.

Required Elements

There are certain required elements needed for a valid identification of replacement property in any 1031 exchange. Here are a few things to keep in mind

1. You need to designate your property clearly and specifically in writing to your qualified intermediary.

2. You must use the postal address(es) of the property (including House/Building Number, Street Name, City, County, State, and Zip Code), and/or the complete legal description (including the Metes and Bounds description, or Lot and Block or Other Subdivisions, or Condominium Unit Number and Name) and/or the County Tax Assessor's Parcel Number (APN, PID or Property Tax Identification Number) or you can use the property’s distinctive name, such as “The Empire State Building”

3. You have to send your written identification to your intermediary before Midnight of the 45th day after the closing of the sale of your relinquished property.

As a general rule, you want to be as specific as humanly possible when identifying replacement property in a 1031 exchange. The more specific you are, the better chance your exchange has of being a success.

Speak with a Qualified Intermediary

If you are looking to defer your capital gains taxes when selling real estate, a 1031 exchange is the answer you’ve been searching for! By rolling your net proceeds into a new replacement property you can effectively defer your capital gains taxes and keep your money working for you. Our intermediaries have two decades of experience working with clients on all types of 1031 exchanges. Reach out to us today to learn more about our 1031 exchange services and to speak with a qualified intermediary about your transaction.

• 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 Change Ownership of a Property after 1031 Exchange

A 1031 exchange allows you to sell a piece of real property and move your sales proceeds into a new property without having to pay capital gains taxes. But what if you want to change ownership of your replacement property after you exchange into it? In this article, we are going to offer some tips for changing ownership of your property after conducting a 1031 exchange.

Changing Ownership

First off – is it possible to change ownership of your property after 1031 exchanging into it? In short, yes. However, there are numerous facts that you need to be aware of so you don’t endanger the validity of your exchange.

Section 1031 requires that the person who conducted the exchange must hold onto their replacement property for investment or business purposes. This is a fundamental rule of 1031 exchanges so it’s vital that you abide by this guideline. If you acquire a replacement property in a 1031 exchange and then turn around and transfer ownership to someone else, the IRS may consider this a violation of the 1031 rules and may void your exchange, leaving you with a big tax bill.

The best advice we can give you is to hold onto your replacement property for a substantial period of time before changing ownership. How long really depends on your situation and the property in question.

1031 Exchanges in Minnesota

The qualified intermediaries at CPEC1031 have twenty years of experience facilitating all types of 1031 exchanges. With our experience and track record, you can rest assured that your exchange is in great hands. Let us handle all the details of your exchange so you don’t have to. Reach out to our 1031 exchange professionals today to learn more about our services and to get your exchange started. We have offices around the country, but our primary location is 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

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