Revisiting the 1031 Exchange Deadlines & Time Limits

1031 exchanges are governed by a list of rules that need to be followed in order to complete a successful exchange. In this article, we are going to discuss the important deadlines and time frames that you need to hit in order to complete a successful 1031 exchange.

180 Days

The most important number to remember for your 1031 exchange is 180. In any 1031 exchange, you have 180 days in total to complete your exchange. That clock starts ticking right after you sell your relinquished property.

There are some exceptions to this rule, but in the majority of exchanges, 180 days is the time frame you have in which to conduct your exchange.

45 Days

The next number to keep in mind is 45. After selling your relinquished property, you have 45 days (the first 45 days of your 180 day exchange period) in which to identify your replacement property in writing.

Exceptions to the Rule

There are a few exceptions to these time rules. For example, if your federal tax filing deadline falls within your 180 day period, your exchange period is shortened to the filing deadline. That is a big potential trap that can sink your exchange. The easiest fix for this is to have your qualified intermediary file for an extension so you can take advantage of your entire 180 days.

Twin Cities 1031 Exchange Company

There are a lot of intricacies that can complicate even the simplest of 1031 exchanges. It’s important to have a qualified intermediary on your team so you make sure that your exchange is executed effectively. At CPEC1031, LLC, our 1031 exchange accommodators have decades of experience helping taxpayers with their 1031 exchanges. If you are interested in deferring the capital gains taxes on the sale of your property, consider a like-kind exchange under section 1031. Contact our Twin Cities qualified intermediaries today to get started with your like-kind exchange of real estate.

• 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 Qualities Make a Qualified Intermediary?

Many people considering a 1031 exchange ask “what is a qualified intermediary?” In the treasury regulations for deferred exchanges, the IRS and the congress have given us four different safe harbors for facilitating deferred exchanges and the qualified intermediary safe harbor is the one that's most frequently used.

A Fancy Escrow Agent

A qualified intermediary is really a fancy escrow agent. It’s a neutral third party that typically prepares the 1031 documents and receives the proceeds from the relinquished property to insulate the seller from receiving the cash derived from the sale of the relinquished property.

The qualified intermediary that holds that cash and applies it for the purchase of the replacement property. So from the IRS’s perspective a seller of the relinquished property doesn't receive the cash, they only receive the like kind replacement property that they designate and purchase within their hundred and eighty day exchange.

A Third Party Unbeholden to the Taxpayer

The idea with a qualified intermediary is that it's a professional third-party unbeholden to the taxpayer that facilitates the exchange so that the taxpayer can derive the benefits of the tax deferral in section 1031 with the certainty that they've stayed within the safe harbor parameters set out in the treasury regulations.

• 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

There are Many Benefits of Single LLC Real Estate Ownership

Here's a piece of advice - never own real estate in a corporation. Now there are always exceptions to that rule, but the preferred vehicle for owning real estate is in an LLC.

Single Member LLCs

In particular, if you're a single individual owning real estate you may prefer to have what's called a single member disregarded entity (or LLC) acquire your replacement properties. For tax purposes the LLC doesn't exist, it rolls up to your social security number. But for state law liability protection purposes the LLC acts as a barrier, protecting you from personal liability associated with the property.

Potential Liabilities

What if you own real estate and someone is bitten by a dog on the real estate that you own? Perhaps you'll be sued under the theory of premises liability that you didn't protect the public from stray dogs attacking pedestrians. Or what if there are environmental contaminants found on the property? Perhaps you’d have some exposure to environmental liability. Because of the uncertainties and the predatory creditors that lurk out there, many people are advised to own real estate inside of a liability protected identity. The question is what entity is most appropriate for you? Oftentimes a limited liability company or LLC is the ideal entity.

Minnesota Qualified Intermediaries

If you're considering a 1031 exchange in Minnesota, contact the qualified intermediaries at CPEC1031, LLC. Our team has over two decades of experience in the 1031 exchange industry. We can help you through all the details of your 1031 exchange and help you defer your capital gains taxes on the sale of real estate. Contact us today at our downtown Minneapolis office to learn more about our services and get started!

• 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 Exactly is a Safe Harbor Reverse 1031 Exchange?

In the year 2002, the IRS finally issued a Revenue Procedure for conducting reverse exchanges. It's a very taxpayer-friendly rev proc in that the intermediary can form an entity to acquire either the new replacement property and hold it until the relinquished property is disposed of, or alternatively the intermediary can acquire title to the old relinquished property and hold it, and allow the new replacement property to be immediately received by the taxpayer.

180 Day Holding Period

In either instance, the IRS limited this holding period to 180 days under the safe harbor. They were mirroring the requirements that are in the straight exchange regulations that limit deferred exchanges to 180 days. The major criticism or limitation of rev proc 237 is that it only allows the parking arrangement with the intermediary to go on for 180 days.

When to Use a Reverse Exchange

But if you have to acquire your replacement property before you've had a chance to get rid of your old relinquished property, a reverse exchange can be a very effective tool to allow your acquisition to still be part of a 1031. Furthermore, in a hot seller's market where it's really really hard to buy because there's lots of competition for properties, and it's really easy to sell, many savvy investors will use a reverse exchange to acquire the replacement property in a reverse exchange so they’ve got a sure thing to exchange into, and then they'll use their 180 days thereafter to offload or dispose of their old relinquished property.

Get Help with Your 1031 Exchange

Get help with your next 1031 exchange of real estate by reaching out to CPEC1031, LLC. Our qualified intermediaries have been providing like-kind exchange assistance to clients throughout the state of Minnesota and across the country for over two decades. You can find us at our primary offices 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

A Primer on 1033 Exchanges

Section 1031 allows taxpayers to defer their capital gains taxes when voluntarily selling their real property. Section 1033 deals with involuntary sales (for example, condemnations, seizures, or losses caused by theft or destruction). In this article, we’re going to talk about the 1033 exchange and when it can be used to defer real estate taxes.

Section 1033

Section 1033 of the Internal Revenue Code deals with involuntary sale or loss of the property in question. 1033 exchanges allow you to retain your sales proceeds, and you have a much longer time period to complete them (2-3 years). Compare that to a 1031 exchange where you have 180 days total to complete your exchange and you are required to roll your sales proceeds into your replacement property.

1033 exchanges are not as common as 1031 exchanges because of the high benchmarks you need to reach, but they are more favorable to the taxpayer. In general, if you are eligible for a 1033 exchange, you should try to do one. If not, then a 1031 exchange is a great alternative.

Like-Kind Exchange Company in Minneapolis

At CPEC1031, LLC, we focus exclusively on like-kind exchanges of real estate under section 1031 of the Internal Revenue Code. Reach out to our 1031 exchange professionals today to learn more about the exchange process and get your 1031 exchange started. Your qualified intermediary can help you through all the elements of your exchange by answering your questions, making advisements, and preparing your 1031 exchange documents. Our main office is located in downtown Minneapolis but we help clients across the country with their exchanges.

• 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