What is the Real Value of a 1031 Exchange?

Many taxpayers have heard of the 1031 exchange, but don’t quite understand the real value of doing a 1031 exchange. In this article, we are going to discuss the value of a 1031 exchange of real estate.

The Real Value

The real value of a 1031 exchange of real property is that you get to defer your capital gains taxes that would have otherwise gone to the government. Instead of writing a check to Uncle Sam, you get to reinvest the net proceeds into a new property without having to pay capital gains taxes on them.

Depending on the location and size of your property, capital gains taxes on a standard sale can be quite a hefty sum – so much so that it may make you shy away from selling the property. That’s why exchanging your property in a like-kind exchange is a more tax advantageous route to take. You can defer those capital gains taxes, and keep your money working for you in a continued investment. Over time, you can continue to exchange up into newer and better properties – essentially deferring your capital gains taxes indefinitely.

1031 Exchange Services in MN

At CPEC1031 we offer 1031 exchange services to taxpayers in Minnesota and across the United States. With more than two decades of experience, our intermediaries have the skills needed to guide you through your transaction and ensure your exchange is 100% tax-deferred. We can prepare your documents, answer your questions, and advise you every step of the way! Reach out to our qualified intermediaries today to get your 1031 exchange up and running. Our main office is located 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.

3 Tips for Finding the Perfect Qualified Intermediary

Many taxpayers are interested in doing a 1031 exchange but don’t know how to find a great qualified intermediary. In this article, we are going to offer some tips for finding a great qualified intermediary for your 1031 exchange of real estate.

Ask For a Referral

An excellent place to start is with your close circle of family and friends. Ask around to see if anyone you know has done a 1031 exchange before. If so, they may have a good recommendation for you.

Do Some Research

If you can’t get a referral, take to the Internet and do some research. Do a Google search for “Qualified Intermediary” or “1031 Exchange Company” in your area and you should find numerous options. Then it’s a matter of doing your due diligence. Check out each intermediary’s website and get to know them a bit better. See if they have any reviews from previous clients, and make sure they do the type of work you’re looking for.

Third-Party Listings

Checking out an intermediary’s website is great, but for a less biased look, check out their reviews on third-party listings like Google. This will give you a better sense of what clients think about the intermediary.

Get Help with Your 1031 Exchange

If you are considering a 1031 exchange of your real property, don’t go it alone! Contact an experienced qualified intermediary who can help you through the ins and outs of the 1031 exchange process. There are many traps that can trip up 1031 exchangors, and an intermediary is your best defense against these. Your QI can also draft all of your required documents and answer any questions you may have. Contact us today at our office in downtown Minneapolis to learn more about the tax-saving perks of a real estate 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 Tips for Calculating Capital Gains Taxes

When you sell a piece of real property at a gain, you will more than likely owe capital gains taxes on the sale. It’s important to get an idea of what this tax burden will be prior to selling your property so you can prepare yourself for the sticker shock (and consider deferring these taxes with a 1031 exchange). In this article, we are going to offer a few tips for calculating your capital gains taxes on your next real estate sale.

Capital Gains Taxes on the Sale of Real Estate

In a nutshell, here’s how to calculate your capital gains taxes on the sale of real estate:

• Net Adjusted Basis. First, you need to calculate your net adjusted basis by subtracting depreciation from the original purchase price, then adding capital improvements.

• Capital Gain. Next, you need to calculate your capital gain by taking the sales price and subtracting the net adjusted basis. Then take that number and subtract the sale cost.

• Capital Gains Tax Burden. Finally, you need to calculate your capital gains tax burden by adding your depreciation recapture and your federal and state taxes.

Use our Capital Gains Tax Calculator

Trying to manually calculate your capital gains taxes can be an arduous task. That’s why we have put together a free tool that you can use to calculate your capital gains taxes quickly and easily. Check out the calculator here:

Capital Gains Calculator

Decades of Experience with 1031 Exchanges

Exchanging property under section 1031 of the Internal Revenue Code can be a complex ordeal. That’s why it’s a good idea to work with a qualified intermediary who has experience with facilitating exchanges of like-kind property. At CPEC1031, we bring more than two decades of experience to the table. We can prepare all of your documents, answer all of your questions, and make sure you have all of your bases covered. Contact us today at our downtown Minneapolis office to chat with one of our intermediaries about 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 “Constructive Receipt” is Defined in a 1031 Exchange

Constructive receipt is an essential term to understand when engaging in a 1031 exchange of like-kind property. In this article, we are going to define constructive receipt and how it comes into play in a 1031 exchange transaction.

What Exactly is “Constructive Receipt”?

Constructive receipt is an important term to be aware of in a 1031 exchange. In particular, it is something you want to avoid at all costs if you want to defer 100% of your capital gains taxes.

1031 exchanges allow you to defer taxes on the sales proceeds of a real estate transaction. However, the catch is that you need to reinvest all of those net proceeds into a new replacement property in order to effectively defer the gains. This incentivizes investors to continue investing and has the added benefit of stimulating the economy. That being said, you are not allowed at any time during the 1031 exchange process to receive any of the sales proceeds. These need to remain in a segregated account until it comes time to reinvest them into your new property. Should you actually receive any of these proceeds during the process – that is known as “constructive receipt” and will trigger taxable boot.

CPEC1031

In any 1031 exchange you want to make sure you are working with a qualified intermediary you can trust. At CPEC1031, our intermediaries have two decades of experience working on 1031 exchanges. We know the process inside and out – and will put our expertise to work for your transaction. Our intermediaries can draft your 1031 documents and answer all of your questions about the process. Reach out to us today at our downtown Minneapolis office to set up a time to chat with one of our experienced 1031 exchange intermediaries.

• 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 You Do a 1031 Exchange Without a Qualified Intermediary?

1031 exchanges and qualified intermediaries go together like Peanut Butter and Jelly. But does that mean that you need to hire a qualified intermediary for your exchange? In this article, we are going to talk about whether it’s necessary to hire a qualified intermediary for your 1031 exchange of real property.

In Most Cases

The short answer to the question of whether or not you need a qualified intermediary for a 1031 exchange is – in most cases. Most 1031 exchanges follow the safe-harbor protocol that requires the use of an intermediary.

Your qualified intermediary is essential to the process because they (among other things) hold your exchange funds for you while you wait for the process to complete. This keeps you from receiving boot and recognizing any gain during the process.

In addition to that, it’s advantageous to hire an intermediary because they act as your guide through the 1031 exchange process. Like-kind exchanges can be complex and there are many common traps for the unwary. Having an intermediary by your side is the best way to ensure your exchange will be a success.

Rare Exceptions

There are a few rare 1031 exchange cases in which a qualified intermediary is not necessary, but these are very uncommon.

CPEC1031

A qualified intermediary is your best bet for completing a successful 1031 exchange transaction. At CPEC1031, our intermediaries can help you prepare your 1031 documents, answer your questions, and advise you on the appropriate replacement property. With more than twenty years of experience, we have the skills needed to ensure that your exchange completes without any issues. Contact us today at our downtown Minneapolis office to learn more about our services and set up an appointment with one of our 1031 professionals!

• 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