Dealing with Oddball Expenses in a 1031 Exchange

In a 1031 exchange, sometimes there are situations in which you have some oddball expenses on the settlement statement that nobody knows how to deal with. It may require reading the loan documents or the item that creates the obligation to pay it. Prepayment penalties on loans and mortgages are ideally going to be treated as additional debt owed to the lender (that can be offset with new debt taken out in conjunction with the replacement property). But you may need to read your loan documents to know if that’s a justifiable position. Worst case scenario, if you pay it out of 1031 exchange funds, it could be considered boot.

Keep Your Money Working Over Time with a 1031 Exchange

If you want to keep your money working for you over time, consider a 1031 exchange of investment real estate. At CPEC1031, LLC we have been helping taxpayers defer their gains and build their wealth with 1031 exchange for over two decades. Our team of skilled intermediaries can help guide you through the process, prepare the necessary documentation, and work with your CPA to ensure you are covering all of your bases. Reach out to our professionals at our Minneapolis offices today to learn more about our services and see how we can help you defer capital gains taxes 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

Avoid Seller Back Financing to Ensure a Successful 1031 Exchange

If you want your 1031 exchange to be clean and simple, avoid seller back financing on the sale of your relinquished property. If you receive a note or IOU from the buyer, that is going to be considered boot.

There are work arounds wherein you can have the note run in favor of the qualified intermediary and then later have the qualified intermediary sell that note for cash to get all cash in the exchange account. However, the conservative play here is to run the note to the intermediary so that the intermediary is receiving all of the cash and non-cash proceeds. That is the best way to avoid jeopardizing your exchange. The even safer play is to not do seller back financing at all.

Compound Your Wealth with a Like-Kind Exchange

A 1031 exchange of investment real estate allows you to compound your wealth over time. Rather than pay a hefty capital gains tax bill when selling investment real estate, exchange the property for bigger and better replacement property and defer your capital gains tax burden in the process. With the help of a qualified intermediary, the 1031 exchange process is efficient and effective. Reach out to the intermediaries at CPEC1031, LLC today to discuss the details of your next like-kind exchange of real estate. We have more than twenty years of experience in the 1031 exchange industry and can help you 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

Can You 1031 Exchange Two Properties for One?

In a 1031 exchange, can you sell two properties and purchase a single replacement property? The short answer is yes – you can sell two relinquished properties and purchase one replacement property in a 1031 exchange.

However, for a 1031 exchange to be fully tax-deferred you need to buy a replacement property of equal or greater value than the sum of the two relinquished properties. So you could sell two duplexes and purchase a 12-unit building as your replacement property, so long as that 12-unit property is greater in value compared with your two relinquished properties. You want to buy up or equal in value and you want to reinvest all of your equity as well. Exchanging from multiple properties into a single property is actually quite a common 1031 tactic. In addition to the tax-saving benefits of any 1031 exchange, it’s a lot easier to consolidate your managerial attention on one big property than two smaller properties that might be spread out in different geographical areas.

Contact CPEC1031, LLC for 1031 Exchange Help

If you’re in need of assistance with your 1031 exchange of real estate, contact CPEC1031, LLC today. Our qualified intermediary team is here to help advise you on the best course of action for your exchange. We have over two decades of experience working with taxpayers on like-kind exchanges of all sizes. Let us answer your questions and help you defer your capital gains tax burden when selling investment real estate. You can find us at our Minneapolis offices to set up an appointment. We work with clients 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Exchange Tax Preparation - IRS form 8824

There is a worksheet (IRS form 8824) that the taxpayer (or their tax preparer) needs to fill out for any 1031 exchange conducted during the year of the tax filing. Form 8824 connects the dots between the relinquished property and the replacement property. It also asks some additional, often complicated or confusing, questions. This is something you need to discuss in detail with your CPA, accountant, or tax preparer. The qualified intermediary is not allowed to “wear two hats” and help with this form. The intermediary can’t be an independent third party if they’re also acting as your tax preparer.

We always recommend that clients take a look at form 8824 before they begin their transaction because it’s a nice way to look at the exchange in reverse. It allows you to see how the transaction will ultimately be reported to the IRS.

CPEC1031, LLC – Qualified Intermediaries for Any 1031 Exchange

At CPEC1031, LLC we have qualified intermediaries available to help with any type of 1031 exchange – from forward exchanges to reverse exchanges and everything in between. With more than twenty years of experience, our team is standing by to guide you through all the ins and outs of the like-kind exchange process. We have helped countless taxpayers just like you defer their capital gains taxes on the sale of qualifying real estate. Contact us today to learn more about the services we offer and how we can help you 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

Can you Buy 1031 Replacement Properties from Different Sellers?

In a 1031 exchange, you can purchase multiple replacement properties from different sellers. We see a lot of people double or tripling down with their exchanges. The real headache is that you have to properly identify all of these properties within your 45 day identification period.

We had a client that sold his optometrist practice but retained the building. When the new optometrist wanted to purchase the medical building, our client agreed to sell on the condition that he needed at least nine months lead time. He then used that lead time to find three brand new single family homes that he intended to use as rentals. When these new properties were ready to go, he then went back and finalized the sale of his old medical building in a 1031 exchange. This is a great way to make sure your 1031 exchange goes off without a hitch. Give yourself plenty of time and line up your replacement properties well in advance so you have plenty of time to get everything finished within the 180 day exchange period.

Plan Ahead to Ensure the Success of Your Like-Kind Exchange

If you want to ensure the success of your like-kind exchange, it’s a good idea to plan ahead. Consult with a qualified intermediary who can guide you through the steps of the 1031 exchange process and determine the viability of your exchange. At CPEC1031, LLC our intermediaries are skilled and experienced – with over two decades in the like-kind exchange industry. Reach out to our 1031 exchange professionals today to learn more about the details of your real estate exchange and see how you can save money by 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved