How to Use 1031 Exchanges to Compound Wealth

A 1031 exchange can be an excellent tool for building wealth over the long term. In this article, we are going to discuss how a 1031 exchange can help you compound wealth over time.

A Typical Sale

In a typical sale of real estate, the seller is responsible for paying capital gains taxes on the net proceeds from the sale. Depending on the value of the property, this can be a sizable tax bill that the seller has to bite the bullet on. Sometimes this potential capital gains tax bill is so high it can discourage property owners from selling.

The 1031 Exchange Alternative

Section 1031 of the Internal Revenue Code provides an excellent, tax-advantageous alternative to selling property outright. In a 1031 exchange, the seller does not keep their net proceeds. Instead, they reinvest those net proceeds into a new replacement property that is higher in value, equity, and debt compared to their relinquished property. When done correctly, the taxpayer is able to defer their capital gains taxes on the sale.

This allows you to avoid a potentially huge tax bill and also keep your money working for you – compounding interest over time in your new replacement property investment.

Your One-Stop Shop for All Things 1031 Exchange

At CPEC1031, LLC, we provide comprehensive 1031 exchange solutions to all of our clients. With twenty years of experience under our belt, you can trust us with the facilitation of your like-kind exchange. Our qualified intermediaries can prepare all of your necessary documentation, advise you on replacement properties, and answer all of your questions. Contact us today to learn more about the 1031 exchange process and to get your like-kind exchange off the ground. You can find 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.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

How to Defer Capital Gains when Selling Real Estate

No one enjoys paying capital gains taxes when selling real estate. Thankfully, there are several tools available to US taxpayers for deferring or avoiding these capital gains taxes. In this article, we are going to discuss a few ways to avoid capital gains taxes on the sale of real estate.

1031 Exchange

Perhaps the best tool for avoiding capital gains taxes is the 1031 exchange. Under section 1031 of the Internal Revenue Code, a taxpayer is able to defer their capital gains taxes on the sale of real property so long as they roll those proceeds into a bigger property. There are numerous other benchmarks that need to be met, but when done properly, a 1031 exchange can result in 100% capital gains tax deferral.

Alternative Options

If, for some reason, you can’t do a 1031 exchange on your property, you still have some potential alternative strategies, including:

• Claiming a Principal Residence Exclusion

• Deferred Sales Trust

• Gifting Property

Defer Your Capital Gains Tax

If you are looking to defer your capital gains tax on the sale of real estate (and who isn’t), consider a 1031 exchange. At CPEC1031, LLC, our qualified intermediaries have more than twenty years of experience helping taxpayers across the country with their real estate exchanges. We can help you through every step of the exchange process – from start to finish. Reach out to us today to set up your 1031 exchange and defer your capital gains taxes.

• 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

What’s the Best Time of Year to do a 1031 Exchange?

We get a lot of questions from people considering 1031 exchanges wondering when they should conduct their exchange. In this article, we are going to discuss when during a given year you should consider starting a 1031 exchange of real estate.

1031 Exchanges can be Conducted Year Round

1031 exchanges of real estate can be performed at any time of year. There isn’t necessarily a “best” or “worst” time of year to facilitate an exchange. That being said, there may be a time of year that you works better or worse for your unique situation. With that in mind, it’s a good idea to strategize with an intermediary about when to begin your exchange.

Be Cognizant of Deadlines

While you can do a 1031 exchange at any time, it’s a good idea to plan ahead and structure your exchange around your own schedule. You also want to think about your tax filing – especially if your exchange straddles your filing deadline. Consult with your CPA on this aspect.

It’s also essential to remember your 1031 exchange deadlines. Once you sell your relinquished property, you’ve only got 180 days to identify and close on your replacement property. The first 45 days of your 180 day exchange period are set aside for you to identify your replacement property in writing. Keep these deadlines in mind as you prepare to embark on your 1031 exchange.

Simplifying 1031 Exchanges

1031 exchanges seem simple on the surface, but once you get into the weeds, things can get complicated quickly. That’s why it’s always a good idea to have a qualified intermediary by your side throughout the process. At CPEC1031, LLC, our intermediaries have over twenty years of experience working on exchanges of real estate. We have the skills and experience needed to help facilitate your exchange. Contact us today at our office in downtown Minneapolis to learn more and get your 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.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

3 Reasons to Consider a 1031 Exchange

There are many reasons why a taxpayer may benefit from a 1031 exchange of real estate, but many people aren’t sure why they should consider a 1031 exchange. In this article, we are going to discuss three reasons you might want to consider a 1031 exchange.

Defer Your Capital Gains

Let’s start with the basics. A 1031 exchange allows you to defer your capital gains taxes when selling real estate. Instead of pocketing the sales proceeds from the sale of a property, you move those proceeds into a replacement property. This allows you to defer your capital gains taxes on the sale and keep your money working for you in a continued investment.

Diversify Your Portfolio

1031 exchanges allow you to get into or out of certain segments of the market. This can help you diversify your portfolio, especially as you get closer to retirement age.

Move to a Different Area

If you are planning to move to a different area and you don’t want to have the burden of managing a property from afar, you can 1031 exchange out of that property and into a new replacement property located closer to where you are moving.

1031 Exchanges with CPEC1031

At CPEC1031, LLC, we specialize in facilitating 1031 exchanges under the Internal Revenue Code. Whether you’re exchanging an apartment complex, a piece or farmland, or another investment property – we have the resources to help you through the 1031 exchange process. Contact us today to learn more about our like-kind exchange services and get your exchange off the ground. Our team can answer all of your questions, advise you on property identification, and even prepare your 1031 documents for you. Find us at our downtown Minneapolis office and reach out to our professionals today!

• 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

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