Does Minnesota Have Any Special Reporting Requirements for 1031 Exchanges?

Minnesota generally conforms to the federal internal revenue rules for 1031 real property exchanges. There is not any special withholding, follow-up tax reporting in subsequent years, or claw-backs for gains later recognized in other states (Minn. Stat. 290.01 Subd. 19). That being said, there are some interesting Minnesota statutes that relate to 1031 exchanges.

Minn. Stat. 289A.12 Subd. 16

Minn. Stat. 289A.12 Subd. 16. is a tax reporting statute that is aimed directly at qualified intermediaries. It states that the commissioner may by notice and demand require a qualified intermediary to file a return relating to transactions for which the intermediary acted to facilitate exchanges under section 1031 of the Internal Revenue Code. The return must include the name, address, and state or federal tax identification number or Social Security number of each of the parties to the exchange, information relating to the property subject to the exchange, and any other information required by the commissioner. 

Minn. Stat. 272.115

Minn. Stat. 272.115 – Certificates of Real Estate Value (CRV) are required by the State of Minnesota when recording a document that transfers real property with a purchase price of over $3,000. Technically a CRV is submitted with the county auditor in the county in which the real property is located when the deed or other document is presented for recording. If a property is being acquired as part of a like-kind exchange under section 1031 of the Internal Revenue Code of 1986, as amended through December 31, 2006, that must be indicated on the CRV form.

Minnesota State Deed Tax

Deed transferring property to the buyer [probably meaning exchangor] from intermediary should be taxed based on the fee charged by the intermediary. While deed transferring property to the intermediary should be taxed based on the value of the real property being conveyed.

• 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 Similarities & Differences Between 1031 and 1033 Exchanges

1031 exchanges and 1033 exchanges both allow taxpayers to defer their capital gains taxes when selling property, but there are some notable differences between the two. In this article, we are going to explain the similarities and differences between the 1031 exchange and the 1033 exchange.

1031 Exchange

The 1031 exchange allows you to defer your capital gains tax on the sale of real estate so long as the property involved is used for investment purposes or in your trade or business. A qualified intermediary is required for this type of exchange, and you must complete your exchange within the allotted 180 day time period. All of your net proceeds from the sale of the relinquished property must be reinvested into the new replacement property.

1033 Exchange

1033 exchanges are only applicable when it comes to property that has been involuntarily converted or exchanged. In other words, section 1033 deals with property that has been condemned, destroyed, or stolen. Unlike the 1031 exchange, a 1033 exchange does not require a qualified intermediary. Instead, the taxpayer simply reports the exchange on Form 4797. There are also no time restrictions for identifying replacement property. However, the net proceeds still must be reinvested in a replacement property of equal or greater value.

Minneapolis Qualified Intermediaries

The qualified intermediaries at CPEC1031, LLC have more than two decades worth of experience facilitating 1031 exchanges of real estate. Our intermediaries are well versed in section 1031 of the Internal Revenue Code and can help guide you through the 1031 exchange process. Let us assist you and ensure that your like-kind exchange is flawless. Give us a call today to set up a time to chat with one of our intermediaries about your exchange. You can reach us at our main 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

Who is Not Allowed to Act as a Qualified Intermediary in a 1031 Exchange

We’ve talked extensively about the role of the qualified intermediary in a 1031 exchange. But choosing a qualified intermediary can sometimes be tricky because some people are excluded from acting as an intermediary. In this article, we are going to discuss you can and cannot act as your qualified intermediary in a like-kind exchange of real property.

Qualified Intermediary Exclusions

In a 1031 exchange, some people are excluded outright from acting as your qualified intermediary. Here are some of the parties who cannot act as your intermediary:

• Related Parties – your father, aunt, brother, sister, etc.

• Agents of the Taxpayer – your CPA, accountant, attorney, etc.

• Employees of the Taxpayer

• Your Real Estate Agent

Anyone who has acted as one of the above parties within the past two years is barred from being your qualified intermediary.

Working with a 1031 Company

In short, a qualified intermediary must be an independent third party with no prior association with the taxpayer conducting the exchange. The best course of action is to work with a company who specializes in facilitating 1031 real estate exchanges. These companies work on like-kind exchange transactions day in and day out and know the process backwards and forwards.

Contact a 1031 Exchange Professional

We work directly with CPEC1031, LLC to facilitate 1031 exchanges of real estate for our clients. The team of qualified intermediaries at CPEC1031 have decades of experience in the 1031 exchange industry. Our intermediaries will prepare your 1031 documents, advise you throughout your exchange, and answer any questions you may have. Give us a call today to speak with one of our like-kind exchange professionals about how you can defer capital gains taxes on the sale of real estate. Our main office is located in Minneapolis, but we work with clients throughout the state of Minnesota, and around 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

6 Tips for Executing a Successful 1031 Exchange

There are many steps to a 1031 exchange, but the process can be boiled down to 6 important milestones. In this article, we are going to walk through the necessary steps to complete a successful 1031 exchange of real estate.

Step 1 – What is Your Gain?

First of all, you need to determine whether or not it makes fiscal sense to do a 1031 exchange vs. and outright sale of your property. This involves calculating your potential capital gains taxes and how much you would save if you did a 1031 exchange.

Step 2 – Does Your Property Qualify?

Before you begin the process you also need to determine whether or not your property qualifies for 1031 treatment. In order to qualify, your property has to be held for investment or business purposes, not for personal use.

Step 3 – Contact a Qualified Intermediary

Once you’ve decided to do an exchange, you need to sign the purchase agreement for your relinquished property. If you haven’t already at this point, it’s time to contact a qualified intermediary so they can insert a cooperation clause into your purchase agreement.

Step 4 – Close on Your Relinquished Property

Next it’s time to close on your relinquished property. Be sure you have all of your required closing documents prepared. Your 1031 intermediary can prepare all of these for you.

Step 5 – Replacement Property Identification

Once you’ve sold your relinquished property, you have 45 days to identify in writing your replacement property.

Step 6 – Close on Your Replacement Property

Finally, you need to close on your replacement property within the 180 day exchange period.

CPEC1031 in Minneapolis, MN

The 1031 intermediaries at CPEC1031, LLC have more than two decades of experience working on 1031 exchanges of all shapes and sizes. Using our extensive experience, we can make sure your exchange goes off without any issues. We can also handle all the necessary document preparation and advise you on which replacement properties to identify. Contact our intermediaries today at our downtown Minneapolis office to learn more about our range of services and to get your 1031 exchange off the ground.

• 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

4 Essential Terms to Know About 1031 Exchanges

There are many terms that crop up during a 1031 exchange of real estate. In this article, we are going to talk about the four most important 1031 exchange terms that you should know.

Like-Kind

The first, and most important term to familiarize yourself with is “like-kind.” All property involved in a 1031 exchange needs to be of like-kind. Thankfully, this is pretty easy when you’re dealing with real estate exchanges. Most US real estate is like-kind to most other US real estate.

Qualified Intermediary

A qualified intermediary is a 1031 exchange professional who helps guide taxpayers through the details of their 1031 exchanges. Think of a qualified intermediary as your 1031 exchange advisor. They can also prepare the documents necessary for your 1031 exchange.

Boot

Boot is defined as any non-like-kind property that the taxpayer conducting the exchange receives during the exchange process. Receiving boot will trigger gain and result in only partial tax-deferral. As a result, it’s best to avoid receiving boot when you can.

Qualifying Purpose

One of the other fundamental rules of a 1031 exchange is that your property must be held for a qualifying purpose. Only property held for use in your trade or business can be exchanged in a 1031 transaction.

Defer Your Taxes with a 1031 Exchange

A 1031 exchange is a fantastic way to defer your capital gains taxes on the sale of real property and keep your hard-earned money working for you in a continued investment. At CPEC1031, LLCwe work with clients across the country to facilitate their 1031 exchanges of real estate. Our qualified intermediaries have decades of experience executing 1031 exchanges and can walk you through every step of the process. Reach out to our like-kind exchange professionals today if you have any questions about your 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