The Importance of Working with an Experienced Qualified Intermediary on Your 1031 Exchange

When it comes to 1031 exchanges, experience matters a lot. In this article, we are going to explain why it’s important to work with an experienced qualified intermediary on your 1031 exchange.

The Dangers of Working with an Inexperienced Intermediary

In the realm of 1031 exchanges, there are a lot of rules and requirements, as well as plenty of traps for the uninitiated. Trying to complete your 1031 exchange by yourself or with an inexperienced intermediary is a recipe for disaster. It’s far too easy for an inexperienced intermediary to miss an important detail or deadline. If that happens, your entire 1031 exchange could be in jeopardy and you might have to abandon ship and recognize all your gain on the sale.

Working hand-in-hand with a 1031 exchange company that has been in the industry for years or even decades is the best way to ensure your 1031 exchange is successful and that you’re able to defer the maximum amount of capital gains taxes on your sale.

1031 Exchange Services in Minneapolis, MN

At CPEC1031, LLC our entire business is focused on assisting taxpayers through the 1031 exchange process. We have twenty years of experience facilitating like-kind exchanges of real estate. Our qualified intermediaries are ready and able to put that experience to work on your next 1031 exchange. Contact us today to learn more about the 1031 exchange process, whether your property qualifies, and how we can help you through all the details. You can find us at our main office located 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

How to Handle Post-1031 Exchange Refinances

A common trap for the unwary in a 1031 exchange is the post-exchange refinance. In this article, we are going to talk about how to handle post-1031 exchange refinances.

Things to Remember with Refinancing 1031 Exchange Property

In a real estate transaction, many bankers are exuberant and want to loan you as much money as you qualify to borrow. They will loan you as much money as they can. But remember, in a 1031 exchange you need to find a home for your equity. You’ve got radioactive proceeds from the sale of your relinquished property. What do you do with radioactive material? You don’t put it in your own pocket. You’ve got to put that radioactive cash into the replacement property.

If you bring in $300,000 as a down payment on the purchase of a new property, when the banker would ordinarily only require a down payment of $100,000 – the banker is going to be scratching their head wondering why you aren’t borrowing more money. They may be unaware of the requirements of a 1031 exchange.

The best course of action is to tailor your loan to the 1031 exchange in question so you don’t overborrow at the moment of acquisition. That way you will acquire a property of equal or greater value, equity, and debt. Then in a subsequent transaction, you can go back and refinance the replacement property after the dust has settled.

CPEC1031 is Here to Help!

Our qualified intermediaries are here to help you through your next 1031 exchange! CPEC1031 has over two decades of experience facilitating 1031 exchanges of all shapes and sizes. We can help you through the finer details of your next 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

How Much do You Need to Rent Out Your Family Cabin Before Doing a 1031 Exchange?

Let’s say you have a cabin up in northern Minnesota that, historically has been used for personal purposes (boating, BBQing, etc.) and now you want to do a 1031 exchange with it. In this article, we are going to discuss how long you need to rent out a family cabin before you can use it in a 1031 exchange transaction.

Vacation Property, Rental Pools & 1031 Exchanges

All property involved in a 1031 exchange needs to be used for investment or business purposes and not for personal use. So you can’t just immediately use your family cabin that you’ve been going to for years in a 1031 exchange. It is possible to use such a property in a 1031 exchange, but it takes a little leg work.

Essentially, you would need to stop using the property primarily for personal purposes, and instead start renting it out for a period of time before using it in a like-kind exchange. The IRS has a safe-harbor for rental pool properties in which they examine the two 12-month periods for the property in question to ensure it met the 1031 exchange requirements during that time. For two 12-month periods, you could put your property into a VRBO or AirBnB rental pool and rent it out for at least 14 days in each of those two 12-month periods. After that point, you could consider using the property in a 1031 exchange.

Like-Kind Real Estate Exchanges

If you’re looking to sell investment real estate, but are hesitant because of potential capital gains taxes, then a 1031 exchange may be a great fit for you! Section 1031 of the Internal Revenue Code allows any US taxpayer to defer their capital gains taxes on the sale of investment real property so long as they meet certain benchmarks. At CPEC1031, our qualified intermediaries have been helping taxpayers with their 1031 exchanges of real estate for over twenty years. Contact us today to learn more about how we can help with your next 1031 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

If Your 1031 Exchange Fails, How Soon Can You Get Your Funds Back?

Sometimes, 1031 exchanges fail. This can happen for a number of reasons. Perhaps the taxpayer couldn’t find a suitable replacement property within their 1031 exchange time limits, or perhaps the taxpayer simply changed their mind before completing the process. In this article, we are going to talk about what happens when an exchange fails and how soon you can get your funds back.

Treasury Regulations

When you engage a qualified intermediary to help you with your 1031 exchange, the intermediary holds your money in a separate, segregated 1031 exchange escrow account so that you (the taxpayer) do not have constructive receipt of those funds. If, later on in the process, the taxpayer decides they do not wish to do a 1031 exchange any longer and wants their money back, this can cause some headaches.

Let’s talk a little bit about how the treasury regulations work. After you sell your relinquished property, you have 45 days to identify your replacement property. If you don’t make an identification, or if you revoke your identification, at midnight on the 45th day your exchange will fail. If you want to tank your 1031 exchange, the best way is to fail to identify or revoke identification of your replacement property. At that point, your qualified intermediary will return your funds to you on the next business day, typically by wire transfer.

A Difficult Scenario

The difficult situation comes when the taxpayer identifies several replacement properties. Let’s say the taxpayer closes on one of those properties but still has unused exchange funds in their account and the other two properties fall through. If this happens in the period between the 45th day and the 180th day of your exchange, you’re in a tough predicament because the intermediary can’t release your funds without jeopardizing your exchange. In that situation, your money may be tied up until after the 180th day.

Qualified Intermediaries at CPEC1031 LLC

At CPEC1031, LLC we facilitate like-kind exchanges of real estate in Minnesota and across the United States. Our qualified intermediaries have decades of experience helping taxpayers defer their capital gains taxes on investment real estate. Contact our team today to learn more about the full extent of our services and how we can help with your next 1031 exchange. You can find us at our primary offices located 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

The Benefits of Build to Suit 1031 Exchange in a Hot Real Estate Market

With the current state of the commercial real estate market, it is expensive to buy replacement real estate, mostly because there’s so much competition in the marketplace. As a result, many people are asking themselves: “why would I pay top dollar for an apartment building that was constructed in 1960, when I could buy land and construct a brand-new apartment building for roughly the same amount?”

In this situation, the taxpayer can save even more money in capital gains taxes by doing a build-to-suit 1031 exchange. With a build-to-suit construction exchange, the intermediary uses the exchange funds to buy raw land and holds title to that raw land while real property improvements are constructed on that land. Then the taxpayer receives that property built to their own specifications at the end of the exchange process, while deferring capital gains taxes on the transaction.

We’re seeing this a lot with small business owners who are moving out of the urban core and moving out to places like Lakeville, Ramsey and other places where land is less costly.

1031 Exchange Qualified Intermediaries

CPEC1031, LLC provides qualified intermediary services to taxpayers throughout the country looking to sell investment real estate under section 1031 of the Internal Revenue Code. Our team has over two decades of experience and can help you through all the steps in the 1031 exchange process. Reach out to us today at our downtown Minneapolis office to learn more about the 1031 exchange process, our services, and how we can assist you with your next like-kind 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved