Reviewing TIC Agreements in a 1031 Exchange

In a 1031 exchange involving tenants-in-common, it’s important to review the two tenants-in-common (“TIC”) agreements to make sure that they comply with 1031 as real property interests and are not by their terms creating a joint venture or partnership. In this article, we are going to provide a few resources for TIC guidance when conducting a 1031 exchange of real estate.

Reviewing TIC Agreements

Here are some authorities for your attorney to consider when reviewing a tenants-in-common (“TIC”) agreement to make sure it will not create a de facto partnership:

• Rev. Proc. 2002-221 (the TIC guidance) Tenant in common: https://www.irs.gov/pub/irs-drop/rp-02-22.pdf

• TIC interest constitutes a direct interest in real property, as opposed to an interest in a business entity (for example, a partnership).

• Each co-owner should have the right to transfer, partition, and encumber the co-owner’s undivided interest in the property, without the agreement or approval of any person.

1031 exchanges involving TIC agreements can get complicated. It’s important to involve everyone on your 1031 exchange team (your attorney, qualified intermediary, and more) to ensure everyone is on the same page.

Consider a 1031 Exchange for Your Next Real Estate Transaction

Consider a 1031 exchange for your next real estate transaction. At CPEC1031, LLC we focus on providing top-tier 1031 exchange services to clients throughout the state of Minnesota and across the United States. We are standing by to help you through the details of your next 1031 exchange of investment real estate. Contact us today at our Minneapolis offices to set up a time to chat and learn more about how a 1031 exchange can help you save money!

• 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

Why You Should Conduct a 1031 Exchange of Real Estate Instead of an Outright Sale

The benefits of conducting a 1031 exchange of real estate are numerous, but many taxpayers don’t understand why they should consider a like-kind exchange instead of an outright sale. In this article, we are going to talk about why you should consider a 1031 exchange of real estate rather than an outright sale.

Defer Your Capital Gains Tax Burden

When you choose to sell a piece of investment real estate in a normal, straight forward sale, you will need to pay capital gains taxes on the net proceeds. Depending on the size of your property, this can be a significant tax burden. When you exchange your property under section 1031, you get to defer this capital gains tax burden by reinvesting your net proceeds into a replacement property.

Compound Your Wealth

Not only do you get to defer your capital gains taxes with a 1031 exchange, you also compound your wealth by continuing your investment into a bigger replacement property. This keeps your money working for you, rather than it going straight to the government in capital gains taxes.

Defer Your Capital Gains Taxes & Maximize Your Gain

Defer your capital gains tax burden and maximize your gain with a 1031 exchange! Section 1031 is available to all United States taxpayers who own real estate held primarily for investment or business purposes. At CPEC1031, LLC our 1031 exchange professionals have been facilitating like-kind exchanges of all types for over twenty years. We can help you through all the unique details of your specific 1031 exchange of real estate. Contact us today at our Minneapolis office to find a time to chat with one of our 1031 exchange specialists.

• 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

What Are Your Options for 1031 Exchange Replacement Property?

In 1031 exchange transactions, some taxpayers have difficulty selecting appropriate replacement property. In this article, we are going to chat about some of your options for choosing replacement property in a 1031 exchange.

Like-Kind Real Estate

When it comes to replacement property, there’s one big category to which you need to adhere and that’s like-kind property. All real estate involved in a 1031 exchange has to be like-kind. Luckily, the definition of like-kind is quite broad. Most investment real estate is considered like-kind property so you have a wide range of options when picking your replacement property. As long as your property is like-kind, you can exchange into different industries or geographic locations. For example, you could sell a duplex in Minneapolis, and purchase farmland in Wisconsin.

Don’t Forget About Your Other Benchmarks

Like-kind isn’t the only consideration you need to take into account when selecting replacement property. Remember that you want your replacement property to be greater than or equal to your relinquished property in value, equity, and debt in order to defer 100% of your gains and get the full benefit of your 1031 exchange.

Tax Deferral is the Name of the Game

When it comes to selling investment real estate and keeping your money compounding over time, tax deferral via 1031 exchange is the name of the game! Section 1031 of the Internal Revenue Code exists to incentivize continue investment and help grow the economy. The best news is that any US taxpayer can conduct a 1031 exchange, so long as their real estate qualifies for 1031 exchange treatment. To learn more about the various rules and requirements of section 1031, reach out to a qualified intermediary at CPEC1031, LLC today to set up an appointment.

• 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 Use Relinquished Property as Collateral for a Down Payment in a 1031 Exchange?

In a reverse 1031 exchange, can you use the relinquished property as collateral for the down payment on the replacement property?

In short, yes. You can use the relinquished property as collateral for the down payment on the replacement property provided all the equity that is tapped out of the relinquished property is in fact applied to purchase the parked replacement property.

You do not want to take equity out in anticipation of a sale for any other purpose…other than to fund the purchase of the parked 1031 replacement property.

The tax rationale for this is that the loan is part of a continuation of investment, not a cash out.

Use a 1031 Exchange to Save Money in Capital Gains Taxes

When executed correctly, a 1031 exchange can help you save money in capital gains taxes. But there are various rules and benchmarks that you must meet in order to achieve full capital gains tax deferral on your sale. Reach out to our team of tax professionals today to learn more about the 1031 exchange process and see how we can help you through the details of your next 1031 real estate exchange. Our office is located in Minneapolis. We work with clients throughout Minnesota as well as across the entire country.

• 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

Why Can’t I Do a 1031 Exchange?

1031 exchanges are excellent vehicles for tax deferral. But they’re not an option in every case. In this article, we are going to talk about a few potential reasons why you might not be able to conduct a 1031 exchange.

Your Property Doesn’t Qualify

The first thing you need to know about 1031 exchanges is that not all property qualifies for 1031 exchange treatment. Personal property is not allowed to be 1031 exchanged. 1031 exchange property must be real estate that is used primarily for investment or business purposes (in other words, your primary home would not qualify). All property involved in the exchange needs to be like-kind as well. If your property doesn’t meet these requirements, you won’t be eligible for a 1031 exchange.

You’ve Already Sold Your Property & Received the Sales Proceeds

1031 exchanges require some planning and foresight. You need to work with a qualified intermediary to set up your exchange before you sell your property. Once you’ve sold your property and received the sales proceeds, you will not be able to set up a 1031 exchange on the sale retroactively.

Minnesota Qualified Intermediary Services

CPEC1031, LLC provides qualified intermediary services for 1031 exchange clients in Minnesota and across the United States. Our 1031 exchange professionals have decades of experience working on like-kind exchange transactions involving real estate. If you are searching for a qualified intermediary to lead your next exchange, you’ve come to the right place! Contact us today to learn more about the 1031 exchange process, its benefits, and how we can help you defer capital gains taxes on the sale of real estate via 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