Video - A Question About 1245 Property

In the event that you go from chicken coop to raw land and there’s a percentage that’s 1245 property, are you liable for the tax on the entire deal or just the tax on the depreciation on that 1245 property.

This might be a planning opportunity because before you sell your chicken coop to the buyer, you may want to say in the purchase agreement: “let’s agree on the allocation of price between the land that I’m selling you and this worn out chicken coop.” You as the seller probably want to minimize the value allocated to the chicken coop building improvement that you’ve written off and you want to maximize the value attributed to the dirt.

The buyer is going to have the opposite intention because as soon as they buy it they’re going to want to take bonus depreciation on that used improvement. So there’s a tension between buyer and purchaser, but generally the IRS will respect an arms length allocated negotiation of value. If you truly did write down that chicken coop, it’s remaining basis should bear some resemblance to its remaining worn out value.

• 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

What Exactly is a Simultaneous 1031 Exchange?

1031 exchanges come in a variety of types. One such type, perhaps the most common, is the simultaneous 1031 exchange. In this article, we are going to explain how exactly a simultaneous 1031 exchange works and when you may want to consider one.

How a Simultaneous 1031 Exchange Works

A simultaneous 1031 exchange is a type of like-kind exchange in which the relinquished property is sold and, immediately after, the replacement property is acquired.

The Benefits of a Simultaneous 1031 Exchange

The benefits of a simultaneous 1031 exchange are the same as any type of 1031 exchange – capital gains tax deferral. A successful 1031 exchange can save you a lot of money that would otherwise be paid out in taxes. You can then keep that money building interest in a continued investment, compounding over time.

Realize the Cost-Saving Benefits of a 1031 Exchange

A 1031 exchange can be a vehicle for massive cost-savings as it allows you to defer capital gains taxes when selling qualified investment real estate. Section 1031 of the Internal Revenue Code is a tool that any United States taxpayer can use to defer their capital gains taxes. Reach out to a qualified intermediary at CPEC1031, LLC today to learn more about the like-kind exchange process and see how we can help facilitate your exchange. You can find us in downtown Minneapolis at our primary office. We also serve clients throughout the United States so don’t hesitate to give us a call if you are located in a different state!

• 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Exchanges Involving Purchase Price Allocations

Recently, we had a client come to us with a unique 1031 exchange situation. In this article, we are going to dig into that question and provide an answer.

The Question

Here’s the 1031 exchange question, according to the client:

• “We have a potential buyer for the relinquished property in St. Paul that wants to be able to force a purchase price allocation as part of the purchase agreement. Their concern is the effect the purchase price will have on the assessed value of the property. They want to do an eCRV that shows a substantial amount of the purchase price being allocated to Goodwill and personal property. So my question is, does the allocation provided on the eCRV make a difference for us in what we can claim for the 1031 exchange? Obviously we want to allocate way less to any Goodwill or personal property because we want to maximize the deferral. 

The Answer

The terms of allocation agreed to in an arms length negotiated contract is VERY problematic. The bill of sale for non real estate is evidence of the intent to sell non real property for other separate consideration. If your basis is low on goodwill and personal property = BIG GAINS recognized by seller and smaller 1031 deferral. My suggestion is to bulk up the value of the real property and hold fast.

Start Deferring Capital Gains Taxes

Start deferring capital gains taxes on the sale of investment real estate now with a 1031 exchange! The first step in any 1031 exchange is connecting with a qualified intermediary who can guide you through the process and make sure your property qualifies for 1031 exchange treatment. The experienced qualified intermediaries at CPEC1031 have been doing like-kind exchanges for clients for over two decades. Let us put our experience to work on your next 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

The Best Way to Determine if Your Property Can Be Used in a Like-Kind Exchange

The first step in any like-kind exchange is figuring out if you can even do one with the property in question. To that end, you need to determine whether your property qualifies for 1031 treatment. In this article, we are going to talk about the best way to determine if your property can be used in a like-kind exchange.

Is Your Property Held for a Qualifying Purpose?

The most important question you need to ask yourself prior to conducting a 1031 exchange is this: “is my property held for a qualifying purpose?”

Any and all property involved in a like-kind exchange must be held for a qualifying purpose. So what exactly is “qualifying purpose” in the realm of 1031 exchanges? In the simplest terms, your real property qualifies for like-kind exchange treatment if it is held for investment purposes, or for use in your trade or business. That immediately excludes property held primarily for personal use (e.g. your primary home).

Reach Out to CPEC1031, LLC to Start Your Exchange

A 1031 exchange may benefit you if you are looking to sell investment real estate but wish to avoid of potentially large capital gains tax bill. Reach out to the qualified intermediaries at CPEC1031, LLC today to start your exchange of real property. Our primary office is located in downtown Minneapolis, but our service area extends throughout the state of Minnesota and across the country. No matter where your property is in the United States, we can help you defer your capital gains with a 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

In What Situations Should You Wait to Start a 1031 Exchange?

Timing is an essential part of all 1031 exchanges of real estate. In this article, we are going to talk about some situations in which you might want to consider delaying the start of your 1031 exchange.

When to Delay Your 1031 Exchange

Here are some situations in which you may want to delay your 1031 exchange:

• It’s the Wrong Time of Year. While you can start a 1031 exchange at any time of year, there may be tax considerations to bear in mind when your exchange straddles two separate years.

• You Can’t Find Suitable Replacement Property. Another reason you may consider delaying is if you can’t find ideal replacement property. Remember you only have a limited amount of time to complete your exchange after it starts. If you can’t find suitable replacement property by the 180 day deadline, your exchange might fail.

Every 1031 exchange is different and these guidelines don’t apply to all exchanges. The best thing you can do when considering an exchange is talk to a 1031 intermediary who can advise you on the best course of action.

It’s Never Too Early To Contact a Qualified Intermediary

That said, even if you plan to wait to begin your 1031 exchange, it’s never too early to consult with a qualified intermediary about your exchange. Getting the ball rolling early by talking with a qualified intermediary can help you ensure everything is set up perfectly and that your exchange will be executed as planned.

CPEC1031, LLC

At CPEC1031, LLC we help taxpayers defer capital gains taxes when selling investment real estate under section 1031 of the Internal Revenue Code. Our team of qualified intermediaries has over twenty years of experience in the like-kind exchange industry. Let our professionals help guide you through the many details of your 1031 exchange and ensure you are able to defer 100% of your gains. You can contact us at our primary office in downtown Minneapolis. We facilitate 1031 exchanges of real estate throughout Minnesota and across 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved