Thinking of Selling a Commercial Property? Consider a 1031 Exchange!

In a hot seller’s market, many property owners get excited to sell their real estate and make a good chunk of change. However, with dollar signs in their eyes, many property owners don’t fully consider the capital gains taxes that they’ll owe on such a sale. A 1031 exchange can help you defer these capital gains taxes. In this article, we are going to talk about why you should always consider a 1031 exchange if you’re thinking of selling real property.

The Many Benefits of a 1031 Exchange

1031 exchanges are not for every situation, but they’re always worth a look when you’re getting ready to sell a piece of real estate. Section 1031 of the Internal Revenue Code allows any US taxpayer to defer their capital gains taxes on the sale of real estate so long as they meet certain requirements, such as:

• The property involved in the transaction must be like-kind

• The property must be held for investment or business purposes (not for personal use)

• The taxpayer must reinvest their sales proceeds into a replacement property

This allows you to avoid a big tax bill and keep your money compounding wealth over time in a newer, bigger replacement property.

Tax-Deferred Exchanges

With over two decades of experience under our belt, we have the skills and experience needed to ensure your 1031 exchange runs smoothly. Our qualified intermediaries can help you prepare 1031 documents, advise you on replacement property identification, and answer all of your questions along the way. Contact us today at our downtown Minneapolis office to learn more about how you can save money on a tax-deferred 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

Why You Can’t Access Your Sales Proceeds in a 1031 Exchange

In any 1031 exchange, it is absolutely essential to keep your hands off of your exchange funds. But why is that? In this article, we are going to discuss why the taxpayer conducting the exchange cannot have access to their exchange funds at any point during the 1031 process.

The Importance of Keeping Funds Separated

In order to defer 100% of your capital gains taxes in a 1031 exchange, you need to redeploy all of your sales proceeds from your relinquished property into your replacement property. If, at any point throughout the 1031 process, you receive any of these proceeds, you will recognize gain and be responsible for paying taxes. To avoid this, you want to keep your paws off of your exchange funds at all times throughout the process.

How to Keep Funds Separated

The best way to keep your funds separated is to work with a qualified intermediary. Your intermediary can keep the money safe for you in a segregated bank account – where the funds will sit until you are ready to redeploy them into your replacement property.

CPEC1031, LLC

If you are considering a 1031 exchange, reach out to a qualified intermediary who can help guide you through the process. At CPEC1031, we have more than two decades of experience working with taxpayers from across the United States on their like-kind exchanges of real property. Contact us today at our downtown Minneapolis office to discuss the details of your real estate exchange and start deferring 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

How do you Fund an Escrow in a 1031 Exchange?

Escrow is a confusing topic for many taxpayers – especially those contemplating a 1031 exchange of real estate. Many people we work with have questions about the rules surrounding escrow accounts in a 1031 exchange. In this article, we are going to offer up a few tips for funding escrow in a 1031 exchange.

Sales Proceeds

One of the most common questions we hear when it comes to escrow accounts and 1031 exchanges is – “can I fund my escrow account with my 1031 exchange sales proceeds from my relinquished property?” This is an excellent question that many people run into during a like-kind exchange.

If you use any of your net proceeds to fund an escrow account, that will likely be considered taxable boot and your 1031 exchange will not be 100% deferred. The best course of action is to fund your escrow account with cash that you bring to the closing table. This will keep everything separate and allow you to defer all you’re your capital gains taxes.

1031 Exchange Services in the United States

Consult with a qualified intermediary about your 1031 exchange today if you are considering a like-kind exchange of property. Working with an intermediary as early in the process as possible is essential to the success of an exchange. We make everything as easy as possible for you by preparing your documents and answering your questions. Give us a ring today to learn more about how we handle exchanges and to get your exchange of real estate started! We provide 1031 exchange services to clients throughout the United States.

• 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 Long to Hold Your Replacement Property in a 1031 Exchange

A lot of real estate investors have questions about the replacement property holding period in a 1031 exchange. In this article, we are going to clarify the tax implications of holding the replacement property in a 1031 exchange.

Holding the Replacement Property

When conducting a 1031 exchange, you have to “Hold” the Replacement Property for investment or business purposes in order to satisfy the requirements of IRC Section 1031.

How long you must hold the property is an open question, but the safe answer is probably two years, particularly if you are considering eventually doing something inconsistent with using for investment or business purposes…like moving into the property as a residence or gifting it away.

The IRS has not issued a bright line holding period, but there is a safe-harbor for rental pool properties that tests each of the two years after an exchange to see if it is primarily used for rental-pool purposes as opposed to personal use.

• 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

Is a Real Estate Agent Necessary in a 1031 Exchange?

There are many moving parts and many players required for a 1031 exchange of real estate. With so many moving parts, it can be confusing to determine who exactly you need on your “1031 team.” In this article, we’re going to talk about whether or not you need to involve a real estate agent in your 1031 exchange.

The Many Players in a 1031 Exchange

There are many players involved in a given 1031 exchange – your qualified intermediary, attorney, CPA, and real estate agent. While a real estate broker is not necessarily required in a 1031 exchange of real estate, it’s typically a good idea to involve a real estate agent. Your real estate broker can help you find a buyer for your relinquished property, and also help you find a suitable replacement property to exchange into. This is especially important in a hot seller’s market, where properties are in high demand.

1031 Exchange Company

At CPEC1031, we help taxpayers with their real estate exchanges under section 1031 of the Internal Revenue Code. There are many rules and guidelines that govern 1031 exchanges, and it’s important that you have a professional on your side to guide you through the process. With over two decades of experience, we have the skills necessary to handle your exchange. Reach out to us today to speak with one of our qualified intermediaries about your real estate exchange. Our primary office is in downtown Minneapolis, but we serve the entire state of Minnesota, as well as other states.

• 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