When is a Construction or Reverse 1031 Exchange a Good Option?

When you are considering a 1031 exchange of real estate, there are many options to consider. Should you do a forward or reverse exchange? Do you want to construct improvements to the new property? These are two of the most important questions you need to ask yourself early on in the 1031 exchange process. In this article, we are going to discuss when to consider a construction or reverse 1031 exchange.

Reverse Exchanges & Construction Exchanges

A reverse 1031 exchange is an exchange in which the replacement property is purchased first, and the relinquished property is sold at a later date. A construction exchange is an exchange in which the exchangor constructs improvements to the new replacement property as a part of the exchange.

When is a Reverse / Construction Exchange a Good Idea?

The best option for your 1031 exchange will depend directly on your specific situation. Reverse exchanges can be beneficial when you need to make a deal quickly and grab a property before it sells to another buyer. Construction exchanges are great for those taxpayers who want to make improvements to their new property and count those improvements as part of the exchange.

1031 Property

At CPEC1031, we work with investors large and small who want to defer their capital gains tax on the sale of real property. We can guide you through the entire 1031 process from start to finish, answering all of your questions and preparing your required documents along the way. Contact us today to speak with one of our 1031 exchange professionals about your like-kind exchange. Our main office is in downtown Minneapolis, but we work with clients 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

How 1031 Exchanges Help the Economy During COVID-19

Section 1031 of the Internal Revenue Code is available to all US taxpayers and can be a crucial tool to help individual businesses and the national economy during the ongoing COVID-19 pandemic. Here are a few ways in which 1031 exchanges are economically beneficial in the midst of a pandemic.

• Section 1031 incentivizes businesses to diversify, consolidate, move into more productive property, or relocate to a different location.

• 1031 exchanges allow small business owners to move into more efficient facilities that meet their needs, rather than being stuck with an inefficient property.

• Like-kind exchanges are often used in conservation easements to reduce erosion, improve water quality, and sustain wildlife and wetlands.

• Farmers utilize 1031 exchanges to improve their operations, consolidate, or relocate while keeping their cash flow intact.

• 1031 exchanges improve communities by encouraging investment for the best use of real estate, and in the process, increase state and local tax bases.

• Like-kind exchanges can aid in the repurposing of office and retail spaces, allowing efficient flow of capital to where it’s most needed.

• 1031 exchanges create jobs and taxable revenue for adjacent industries such as realtors, title insurers, escrow agents, lenders, surveyors, contractors, inspectors, attorneys, and more.

1031 Exchange Professionals

At CPEC1031, we help clients throughout the United States defer capital gains taxes through the use of the 1031 exchange. We have over twenty years of experience in the 1031 exchange industry and can help you through your exchange – no matter how complex. Contact us today to learn more about the extent of our services or to get started with your next 1031 exchange of real estate. You can reach us at our primary offices 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 Change Qualified Intermediaries in a 1031 Exchange

Having a qualified intermediary by your side during the 1031 exchange process is essential to the success of your exchange. But not all intermediaries are created equal, and you may find that you don’t trust or get along with your intermediary once you’ve begun the process. If you find yourself in this situation, is it possible to switch intermediaries? In this article, we are going to talk about how to change qualified intermediaries in the midst of a 1031 exchange.

Swapping Intermediaries

If you have already begun the 1031 exchange process and transferred your exchange funds over to your intermediary, it’s probably best to stick with your intermediary until the 1031 process is complete. If you have not yet transferred your funds to the intermediary, it is much easier to switch intermediaries.

Do Your Due Diligence

While it is possible to change intermediaries midway through an exchange, doing so will cause a lot of headaches and potential delays. Make sure you do your due diligence and find an intermediary that you can trust well before you being the 1031 exchange process. The more prepared you are the more likely your exchange will succeed.

Qualified Intermediary Services

A 1031 exchange is a complex beast and requires the experienced hands of a qualified intermediary to ensure 100% tax deferral. At CPEC1031, our intermediaries have two decades of experience working with clients on their 1031 exchanges. We can answer all of your questions, advise you on property, and prepare your 1031 documents. Contact our intermediaries today to learn more about the services we provide and to get your 1031 exchange off the ground. Our main office is in downtown Minneapolis, but we work with clients 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

How 1031 Exchanges Fail

Without the proper planning and precautions, 1031 exchanges can fail. In this article, we are going to talk about how 1031 exchanges fail and how to avoid a failed 1031 exchange.

Constructive Receipt

Perhaps the biggest reason that 1031 exchanges fail is that the taxpayer conducting the exchange receives boot during the exchange process. Boot can come in many forms.

If you take constructive receipt of any boot throughout the process, you can end up with a failed or partial exchange. To prevent this, make sure you take care to avoid receiving boot at all times during your exchange period.

Failure to Meet the Requirements

Your 1031 exchange can also fail if you do not meet the numerous requirements set out by the IRS. If your exchange does not complete within the allotted 180 day time period, your exchange will fail. If your property fails to meet the 1031 exchange requirements (like-kind, qualifying purpose), your exchange will fail. If you do not go up in value, equity, and debt on your replacement property, your exchange will fail. Be sure to check off all the appropriate boxes and work with your qualified intermediary to make sure your exchange meets all the necessary requirements.

Qualified Intermediaries in Minnesota

Looking for a qualified intermediary in Minnesota? You’ve come to the right place! At CPEC1031, our intermediaries have over twenty years of experience facilitating exchanges throughout Minnesota and the United States. We can help you identify replacement property, prepare your 1031 exchange documents, and more! Contact us today to learn more about our qualified intermediary services and get your exchange started! Our main office is located in the heart of downtown Minneapolis, but we work with taxpayers throughout the United States on their exchanges of real estate.

• 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 FAQs About Deferred Sales Trusts

We’ve talked about Deferred Sales Trusts before and how they can be a viable alternative to 1031 exchanges. But there are a lot of questions surrounding DSTs. In this article, we are going to answer three frequently asked questions about deferred sales trusts.

Is a Deferred Sales Trust a Tax Loophole?

No, a deferred sales trust is not a loophole. Section 435 of the Internal Revenue Code (which defines DSTs) has been in the code for a long time, and many taxpayers sell property under installment arrangements. In short, DSTs are a completely legitimate tax strategy.

Will I Be Audited if I do a Deferred Sales Trust?

Audits are always a possibility, no matter who you are. However, contrary to popular belief, merely engaging in a 1031 exchange or deferred sales trust transaction does not make you a more likely target for an audit.

After Starting a DST, can I sell Additional Property?

Absolutely. After you have the deferred sales trust set up you can add additional properties. This can get a little complicated so make sure you are working with a qualified intermediary to make sure you have all of your details covered.

CPEC1031

At CPEC1031, LLC, we employ qualified intermediaries who specialize in 1031 exchanges of real property. With more than 20 years of experience, our team of intermediaries can walk you through every step of your exchange from beginning to end. Our primary office is located in downtown Minneapolis, but we work with clients throughout the state of Minnesota, the Greater Midwest, and across the United States. Contact us today to learn more about our 1031 exchange services and start deferring your capital gains taxes on the sale of real estate!

• 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