In a 1031 Exchange, Do the Titles of the Relinquished & Replacement Properties Have to be in the Same Name or Entity?

Many people think that, in a 1031 exchange, you need to use the exact entity for both the relinquished property and the replacement property. However, that’s not always the case.

The bottom line is that the same taxpayer needs to be the one selling and purchasing all property in a 1031 exchange. That said, the properties do not have to be titled identically. It could be the taxpayer acting between and through a trust or LLC or something else.

Every US taxpayer is an individual with a social security number. If you want to buy property in your revocable trust, that’s probably considered you as well because revokable trusts are not separate and distinct taxpayers. If you want to buy property in your own single-member LLC that’s disregarded for tax purposes (everything rolls up to your schedule E on your personal tax return), that’s still considered you for 1031 exchange purposes.

Qualified Intermediaries who can Help with Your Like-Kind Exchange

At CPEC1031, LLC our qualified intermediaries can help set up and execute your like-kind exchange of real estate. We have more than twenty years of experience assisting taxpayers across the country with real estate exchanges under section 1031 of the Internal Revenue Code. Let our team of professionals help you through all the details of your next like-kind exchange of investment real estate. Contact us today at our Minneapolis office to learn more about the benefits of the 1031 exchange and see if your property is a good fit for a 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

How to Handle 1031 Exchanges Involving Partnerships

Partnerships are great for buying and owning property. But partnerships can be awful when you want to sell property.

If you’re in a partnership and are thinking about selling property in a 1031 exchange, it might be a good idea to reconfigure the ownership into a tenancy-in-common before even listing the property for sale. That breaks everyone out into separate ownership. It’s also a good idea to negotiate with your bank at the very beginning of the process that they will consent to their collateral being reconfigured into a different ownership structure.

If a partnership owns a piece of property it is the entity that’s the most qualified to conduct the exchange. If everyone in the partnership votes unanimously that they’ll stay together and do the exchange at the entity level, then things will be fine. But quite often, it’s not that simple and partners want different things. This is why it’s important to consult with a real estate attorney early in the process to discuss the available options for splitting up the property in a way that will benefit everyone involved.

Make a Plan for Your Next 1031 Exchange

Make a plan for your next 1031 exchange of real estate by contacting the qualified intermediaries at CPEC1031, LLC. Our team has more than twenty years of experience facilitating exchanges that run the gamut from small and simple to big and complex. We can put our experience to work for you by helping you defer your capital gains taxes on the sale of investment real estate in a 1031 exchange transaction. Contact our team today to learn more about the benefits of section 1031 and how you can get started with the process.

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

The Many Motivations for Doing a 1031 Exchange

There are many different motivations for doing a 1031 exchange of real estate. One motivation that we often see in the Minneapolis area is what we call “grumpy goats.” These are people who are fed up with various things (high tax rates, insurance, local regulations and restrictions, tenants, etc.) and want to try out owning real estate in a different area. So they sell their relinquished property but they don’t want to get slapped with the taxes so they do a 1031 exchange.

The first thing that you have to do in this situation is talk to a qualified intermediary. If you sell your property and leave the closing table with your proceeds in hand, you’ve got the recognition of gain and cannot do a 1031 exchange. It’s important to engage with a qualified intermediary before you start the process.

Exchange Your Investment Property in a 1031 Transaction

Exchange your qualifying investment property in a 1031 transaction and realize the tax-saving benefits of the like-kind exchange. Reach out to the tax-deferral professionals at CPEC1031, LLC today to learn more about the 1031 exchange process. Our qualified intermediaries have over twenty years of experience working on exchanges of all types in Minnesota and across the United States. We can help guide you through the process of your 1031 exchange and make sure you leave no stone unturned. Find us at our downtown Minneapolis offices, where are ready and waiting to help you through the details of your 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

Explaining the 3 Property and 200% Rules for 1031 Identification

In a 1031 exchange, the qualified intermediary acts as an insulator by temporarily taking possession of the sales proceeds and, under a contract, utilizing that money to purchase replacement property as a continued investment.

That property needs to be identified clearly and unambiguously within 45 days after the closing of your relinquished property. The most common identification rule is the “three property rule,” under which you can identify any three like-kind properties. For example, in Minneapolis you could identify the IDS Center, the Foshay Tower, and the Wells Fargo Center. These are three incredibly expensive pieces of property, but that doesn’t matter for 1031 exchange purposes. Under the three property rule you can identify three or fewer properties – regardless of how expensive they are.

An alternative 1031 identification rule is the “200% Rule.” Under that rule, you are allowed to designate more properties so long as the total value of the properties you identify cannot exceed twice the value of what you relinquished. Let’s say you sold a property for $1 million. Under the 200% rule, you could identify up to $2 million worth of replacement property – regardless of the total number of properties identified.

Discover the Benefits of the 1031 Exchange

Any United States taxpayer can utilize a 1031 exchange to defer capital gains taxes on the sale of qualifying investment real estate. Realize the tax-saving benefits of section 1031 by discussing the process with a qualified intermediary. At CPEC1031, LLC our intermediaries have decades of experience facilitating like-kind exchanges under section 1031 of the Internal Revenue Code. Our intermediaries can work with you throughout the entire process – answering all of your questions and clearing up any confusion along the way. Contact us today to set up a time to chat with our team of 1031 intermediaries.

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

The Key to Executing a Fully Deferred 1031 Exchange

If you want to do a partial 1031 exchange and pay a little bit of tax, you can do it. But the first thing that happens in a 1031 exchange is that your old adjusted basis gets transferred to the new property. You don’t really start to benefit from your 1031 deferral until you’ve bought replacement value over and above your transferred basis. If your old basis was $200,000 and you buy a $300,000 replacement property, you’re deferring gain on that additional $100,000 of value that you just purchased over and above your transferred basis.

That’s great, but maybe your gain was $700,000 and you bought down in value so much that you only end up deferring $100,000 in gain. The rules are kind of stacked against you. You can really fix everything by investing all of your cash into more expensive property. That’s the fundamental key to executing a 100% deferred exchange.

1031 Exchanges of All Types

1031 exchanges come in many different shapes and sizes – from forward exchanges to reverse exchanges and everything in between. The skilled intermediaries at CPEC1031, LLC have experience facilitating all types of 1031 exchanges both in Minnesota and around the country. See if you are a good candidate for a 1031 exchange by contacting our qualified intermediaries, who can guide you through the exchange process and answer any questions that arise. You can set up a meeting with our team today at our 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved