The Benefits & Drawbacks of a 1031 Exchange

With any real estate transaction, there are advantages and disadvantages. In this article, we are going to look at some of the pros and cons of a 1031 exchange.

Pros of a 1031 Exchange

Here are some of the pros of doing a deferred exchange under section 1031:

• Tax Deferral. When you complete a 1031 exchange, you get to defer your capital gains taxes on the sale of your property.

• Compounding Interest. In a 1031 exchange, you get to defer your taxes and keep that money working for you and compounding interest in a continued investment that will reap benefits over time.

Cons of a 1031 Exchange

If you’re looking to save money on taxes, there really aren’t too many downsides of doing a 1031 exchange. There is one situation in which you may not want to consider a 1031 exchange, however:

• You Don’t Keep Your Proceeds. In order to complete a successful 1031 exchange, you need to move all of your sales proceeds into your replacement property. That means you don’t get to pocket any of these proceeds. If you’re strapped for cash, this can be one downside of a 1031 exchange.

Begin the 1031 Exchange Process

If you’re looking to begin the 1031 exchange process on a property you own, you’ve come to the right place. At CPEC1031, LLC, we have more than two decades of experience working in the1031 exchange industry. We facilitate real estate exchanges for clients throughout the state of Minnesota and across the country. Our intermediaries can help you prepare all of your documents for closing and advise you throughout the process. Contact us today at our Minneapolis office to learn more and set up a time to chat with one of our 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 Work with a 1031 Qualified Intermediary From Another State?

Many taxpayers conducting 1031 exchanges of real estate have questions about who to hire as their qualified intermediary. In this article, we are going to talk about the roles and restrictions of a qualified intermediary from a geographical perspective. Specifically, we’ll discuss whether your qualified intermediary can live in a different state from you and/or your property.

Intermediaries Across State Lines

Section 1031 is a federal statute that is applied to all 50 states. That’s how we are able to conduct exchanges for clients across the country. Your qualified intermediary can live and work in a completely different state and still facilitate your exchange. You can live in New York and hire an intermediary in Minnesota and it will be perfectly fine. In fact, it happens all the time!

All that being said, there are various state and local customs that can impact a like-kind transaction. It’s important to work with a qualified intermediary who has experience and knowledge in the location of your transaction.

Section 1031

The 1031 exchange professionals at CPEC1031, LLC have more than twenty years of experience facilitating exchanges for taxpayers in many different business segments. Our qualified intermediaries are your guides to exchanging property under section 1031. We can help you identify replacement property and prepare all of your necessary documentation. Contact us today to get your exchange started. Our primary office is located in downtown Minneapolis, but we work with clients throughout the Twin Cities, greater Minnesota, and 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

Is It Possible to Change Your Identified Property After Day 45 of Your 1031 Exchange Period?

Many taxpayers have questions about the identification period in a 1031 exchange. In this article, we are going to tackle the question of whether or not you can make changes to your identified replacement property after the 45th day of your exchange.

Identification Rules

The quick and easy answer to this question is no. After the 45th day of your identification period, you cannot make any changes to your identified property without cannonballing your exchange. That means you cannot identify new property, or change anything about the property you previously identified. The identification period rule is hard and fast – the IRS doesn’t allow any wiggle room on it.

Plan Ahead

The strictness of this rule further underlines the importance of planning ahead when it comes to your 1031 exchange. 45 days is not a lot of time. You want to make sure you have all of your ducks in a row before you begin the exchange process. You can also lock in your replacement property first, before selling your relinquished property, by doing a reverse exchange. Whatever you’re considering, it’s a good idea to consult with a qualified intermediary about your options and the best course of action.

Contact Us Today

A 1031 Exchange can help you defer capital gains taxes when selling real estate. The best news is that this section of the Internal Revenue Code is available to all United States taxpayers. The qualified intermediaries at CPEC1031, LLC can help you through all the stages of your exchange. Give our intermediaries a call today to learn more about the various services we offer and how we can help you save money on taxes. Our office is located in downtown Minneapolis, but we provide services to clients in many 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 Effectively Deal with Taxable Boot in a Like-Kind Exchange

Boot is a big deal in the realm of 1031 exchanges, but many taxpayers don’t pay enough attention to it, and end up paying the price (literally). In this article, we are going to talk about how to deal with taxable boot in a 1031 exchange.

A Brief Refresher on Boot

First, let’s make sure we’re all on the same page when we use the word “boot.” In a 1031 exchange, boot refers to any non like-kind property received during the course of a 1031 exchange. Typically, boot comes in the form of cash. When a taxpayer receives any cash proceeds during their 1031 exchange, they are deemed to have received boot and will be taxed accordingly. In general, you want to avoid boot at all costs in a 1031 exchange.

Dealing with Boot

Boot is a complex topic but the most important thing to remember is you do NOT want to receive any boot at any point during the 1031 exchange process. So how do you avoid boot? By following the strict regulations of section 1031 of the Internal Revenue Code. This is where a qualified intermediary can be invaluable in helping you through your exchange.

Defer Your Capital Gains Taxes

In a 1031 exchange, you can defer your capital gains taxes when selling a piece of investment real estate. But it’s not quite as easy as it sounds. You need to satisfy a number of requirements in order to have a successful 1031 exchange. This can all get a bit complicated, but with the help of a qualified intermediary, your exchange can go off without a hitch! Contact our intermediaries today to learn more about our services and to set up a time to chat about your exchange. You can find us at our primary office 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

A 1031 Exchange is a Balancing Act

Balance is an essential element in any 1031 exchange. An imbalance can result in only a partial exchange, or the complete failure of your property exchange. There are a several things you need to keep in mind so that your like-kind exchange remains balanced In this article, we are going to offer up some tips for balancing your 1031 exchange.

Reinvestment

First of all, you need to remember to reinvest all of the proceeds from your sale into your new replacement property. Many taxpayers feel tempted to pocket some of these proceeds, but any proceeds that you receive will result in boot that you will need to pay taxes on. Keep your hands off of these net proceeds and reinvest 100% of them into your replacement property.

Value Replacement

Make sure that your replacement property is of equal or greater value than your relinquished property. You always want to exchange up, not down.

Debt Replacement

Finally, you need to ensure that the debt you are taking on with your replacement property is equal to (or greater than) that of your relinquished property. If it is not, pay the difference in cash at the closing table.

Do a 1031 Exchange on Your Property

A 1031 exchange can be very beneficial from a tax point of view. It’s something you should always consider when selling investment real estate. Talking through your options with a qualified intermediary is a great way to wrap your head around the process and benefits of a 1031 exchange. At CPEC1031, LLC, our intermediaries have twenty years of experience in the 1031 exchange industry. We can walk you through every step of the 1031 exchange process. Give us a call today to learn more and chat with our team 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