4 Replacement Properties Options to Consider for Your 1031 Exchange

Finding the ideal replacement property is one of the most difficult aspects of a 1031 exchange of real estate. In this article, we talk about four replacement property options to consider for your 1031 exchange.

Find a Replacement Property on your Own

Purchase traditional like-kind real property* for investment or business purposes. For example, this could be medical office buildings, industrial property, hotels, malls, retail stores, farm land, multifamily housing or other real properties.

Buy a Tenancy-in-Common Interest

Purchase a syndicated tenant-in-common interest in real property.

Eventually go into an UPREIT

Purchase a syndicated tenant-in-common interest in real property* and later contribute it to an UPREIT (IRC Section 1031 Exchange followed by a subsequent IRC Section 721 contribution of the property to an umbrella partnership real estate investment trust).

Buy a DST

Purchase a beneficial interest in a Delaware Statutory Trust (“DST”)* that holds real property investments.

* If you are purchasing like-kind real property to complete your 1031 exchange, you must designate (identify) your Replacement Property within 45 days after the closing of the sale of your old Relinquished Property. Consult with your advisors early and have a back-up plan in case you are unable to acquire your primary designated replacement property.

• 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.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

Can 1031 Exchanges be Entirely Tax Free?

1031 exchanges are a great way to save taxes on the sale of real estate. But are 1031 exchanges entirely tax free? That’s our topic for this article. Read on to learn more!

Tax-Free vs. Tax-Deferred

1031 exchanges are not “tax free.” A more appropriate way of saying would be that 1031 exchanges are tax deferred. When you conduct a 1031 exchange, you defer your capital gains tax on the exchanged real estate. That does not mean that the taxes simply disappear. Rather, they are deferred to some point in the future. If at some point down the line you decide to sell the replacement property that you exchanged into, you would then have to pay capital gains taxes on the sale of that property.

1031 Exchange Advisors

CPEC1031, LLC has two decades of experience working with taxpayers all over the country on their 1031 exchanges of real estate. We have the experience and the skills necessary to make sure your exchange meets all the requirements set out by the IRS. We can prepare all your documentation, answer your questions, and advise you every step of the way. Contact us today to learn more about the 1031 exchange or to get your exchange started. Our main office is located in Minneapolis, but we work with clients across the state and 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.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

Qualified Intermediary vs. Third-Party Administrator – What’s the Difference?

There are a lot of confusing terms in the realm of 1031 exchanges. Two you may hear quite often are “Qualified Intermediary” and “Third Party Administrator.” In this article, we are going to discuss the distinction between these two common 1031 exchange terms.

Qualified Intermediary

A qualified intermediary is a like-kind exchange expert who assists taxpayers through the 1031 exchange process. Here are a few essential items that a qualified intermediary can help you with during the 1031 exchange process:

• Document Preparation. There are numerous documents that need to be prepared in any 1031 exchange. Attention to detail is paramount on these documents as even a small error can jeopardize your exchange. Your intermediary can prepare all of these documents for you and make sure you’ve covered all your bases.

• Replacement Property Identification. You need to properly identify your replacement property during the 1031 exchange process and your intermediary can help you do that appropriately.

• Answering Questions. Any questions you have throughout the process can be answered by your intermediary.

Third-Party Administrator

A third-party administrator is basically just another term for a qualified intermediary. They mean essentially the same thing and can be used interchangeably. Whatever you call them – qualified intermediary or third-party administrator – it is important to work with one on your exchange.

Continued Real Estate Investment

With a 1031 exchange, you can defer your capital gains taxes on the sale of real estate and, ultimately, keep your hard-earned money working for you in a continued real estate investment. The first step is to work with a qualified intermediary who can walk you through the process, answer your questions, and advise you every step of the way. Contact our 1031 exchange intermediaries today to discuss the ins and outs of your exchange. Our office is located in downtown Minneapolis, but we work with 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.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

How to Know if You’re in the 1031 Exchange Strike Zone

Before you conduct a 1031 exchange, you need to make sure that your property falls within the IRS strike zone for qualified property. In this article, we are going to talk about the 1031 exchange strike zone and whether your property falls within it.

Property Within the Strike Zone

The 1031 exchange strike zone is a set of criteria that govern what exactly qualifies for 1031 exchange treatment. Here are a few types of property that fall within the strike zone:

• Like-kind real estate that is held primarily for investment or business purposes.

Property Outside the Strike Zone

Here are some examples of property that exist outside the 1031 exchange strike zone:

• Real property used primarily for personal purposes – such as your primary residence or lake cabin. These are for personal use, not investment or business purposes.

• Personal property such as artwork, aircraft, and more are no longer considered eligible for 1031 exchange treatment.

• Property held primarily for resale – including flipped houses.

Defer Taxes with a 1031 Exchange

CPEC1031, LLC has been helping taxpayers defer their capital gains taxes when selling real estate for more than twenty years. Our intermediaries have the skills and experience to facilitate your exchange from start to finish. We will advise you, answer your questions, and prepare your required documents for closing. Contact our office today in downtown Minneapolis to chat with one of our intermediaries about your exchange. With a 1031 exchange, you can defer your taxes and keep that money working for you in a continued investment!

• 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.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

Tips for Reporting Your 1031 Exchange to the IRS

Reporting your 1031 exchange to the IRS is an essential step in the exchange process. But many investors aren’t sure how to appropriately report their exchange. In this article, we are going to discuss how to properly report your 1031 exchange to the IRS.

IRS Form 8824

1031 exchanges should be reported using IRS form 8824. This form is a sort of worksheet that explains to the IRS the details of your exchange – your relinquished property, your replacement property, etc.

It is important to file this form so that the IRS is aware that you are conducting a 1031 exchange. Otherwise they may think that you still owe taxes. When you sell a piece of real estate (your relinquished property), the title company that closes the transaction is required to report the sale to the IRS on a 1099. If you fail to file form 8824 detailing your exchange, the IRS is likely to think that you have not paid your capital gains taxes on the sale.

It’s always a good idea to involve your CPA in this process, as they will know your tax situation best.

St. Paul 1031 Exchange Company

If you are considering a like-kind exchange of real property, your first step should be to consult with a qualified intermediary about your transaction. A skilled intermediary can help you wrap your head around the exchange, advise you on your best property options, and prepare all of your 1031 documents for closing. At CPEC1031, LLC, we have twenty years of experience helping clients with their 1031 exchanges. Contact us today at our downtown Minneapolis office to learn more about the exchange process and get started with 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.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved