Capital Gains Tax Options When Selling Investment Real Estate

When you sell a piece of investment real property, you have several options to consider when it comes to capital gains taxes. In this article, we are going to outline some of your options for dealing with capital gains taxes when selling investment real estate.

Pay the Capital Gains Taxes in an Outright Sale

The simplest and least tax-advantageous option at your disposal is to simply sell the investment property in an outright sale. This is often the easiest method, but it triggers a capital gains tax burden that can be quite hefty depending on the details of your transaction.

Defer the Capital Gains Taxes via a 1031 Exchange

If you want to sell your investment property but are hesitant to pay a large capital gains tax bill, then a 1031 exchange may be the best option for you. A like-kind exchange is often the most tax-advantageous method for selling investment real estate as it allows you to defer your capital gains tax burden so long as you reinvest all of your net proceeds from the sale into a like-kind replacement property.

1031 Exchanges – Great Vehicles for Tax Deferral

1031 exchanges are great vehicles for tax deferral when selling real estate that qualifies for like-kind exchange treatment. Before you begin the process, you need to make sure that your property is a good fit for a like-kind exchange. A qualified intermediary is an excellent resource who can answer all of your questions about 1031 exchanges and help ensure you can defer 100% of your capital gains taxes. CPEC1031 intermediaries have more than two decades of experience doing just that. Reach out to us today at our downtown Minneapolis office to learn more about how we can help you through the 1031 exchange 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

When a Reverse 1031 Exchange May Be Your Best Option

If you’re thinking of doing a 1031 exchange, you have several types of exchanges to consider – forward exchanges, build-to-suit exchanges, and reverse exchanges. Determining which type of exchange is right for you can be difficult. In this article, we are going to talk about when a reverse 1031 exchange may be your best option when selling investment real estate.

When the Real Estate Market is Competitive

Perhaps the best time to conduct a reverse 1031 exchange is when the real estate market is hot. One trap that trips up many taxpayers conducting 1031 exchanges is the 180 day time period. Once you begin your exchange, you have just 180 days to finish the process. If you can’t find a replacement property within that timeframe, your exchange is in danger of failing. This can be a particular concern when the real estate market is competitive and properties are being snatched up quickly.

With a reverse exchange you can lock down your replacement property before you sell your relinquished property. This allows you to secure a replacement property that you like before someone else is able to get it first.

1031 Exchange Professionals Located in Minneapolis, MN

If you’re looking for help with your 1031 exchange of real estate, you’ve come to the right place! CPEC1031, LLC is a full service like-kind exchange company providing qualified intermediary services to clients throughout the United States. We have more than two decades of experience working on 1031 exchanges of all kinds. We can help you through the many details of your next 1031 exchange and make sure you are able to defer 100% of your capital gains tax burden. Reach out to us today to learn more about our 1031 exchange services and see how we can help!

• 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

6 Types of Disregarded Entities That May Be Involved in a 1031 Exchange

Many 1031 exchanges of real estate involve disregarded entities. Here is a summary of some of the various types of entities that can be classified as disregarded entities or DREs, along with some relevant details:

1. Sole Proprietorships DBA. Sole proprietorships doing business under a business name are not really separate legal entities; they are simply extensions of the individual owner. Income and expenses are reported on the individual’s personal tax return (Form 1040, Schedule C).

2. Some grantor trusts. Certain grantor trusts are treated as disregarded entities for federal income tax purposes. The income generated by the trust is reported on the grantor's personal tax return.

3. Single-Member Limited Liability Companies (LLCs). A single-member LLC is treated as a disregarded entity unless it elects to be taxed as a corporation. The owner reports income and expenses on their personal tax return.

4. Wholly Owned Partnerships. When a partnership has only one unique owner, it is treated as a disregarded entity for tax purposes.

5. Qualified Subchapter S Subsidiaries (Q-Subs). A Q-Sub is an entity that is wholly owned by an S corporation and is treated as a disregarded entity for tax purposes.

6. Qualified Real Estate Investment Trust Subsidiaries. These are subsidiaries that qualify under specific IRS rules and are disregarded for tax purposes.

1031 Exchanges Come in Many Forms

1031 exchanges come in a variety of different forms – each with its own benefits. A qualified intermediary can help you determine which type of exchange is best suited to your needs. At CPEC1031, LLC we focus exclusively on the facilitation of 1031 exchanges. Our qualified intermediaries have more than two decades of experience and are on hand to help you through the details of your next like-kind exchange of qualifying real estate. Contact our team of professionals today to set up a time to chat and start realizing the benefits of section 1031.

• 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

Basic Rules for Doing a Tax-Deferred Exchange

In order to defer 100% of your capital gains tax burden in a like-kind exchange, there are a variety of rules you need to follow. In this article, we are going to detail a couple basic rules for conducting a fully tax-deferred 1031 exchange.

Don’t Exceed Your Time Limits

There are many things that can delay or derail a commercial real estate transaction. However, 1031 exchanges are governed by unforgiving time tables. Once you begin the process, you have just 180 days to complete your exchange. The first 45 days of that period make up your identification period, during which you need to identify in writing the replacement property that you wish to use. If you miss any of these deadlines, it’s likely that your exchange will fail so it’s important to be well prepared before beginning the exchange process.

Go Up in Value, Equity & Debt

Finally, you need to make sure that your replacement property goes up in value, equity, and debt in comparison to your relinquished property. If you don’t meet these thresholds, you may still be able to do a partial 1031 exchange (in which you defer some, but not all, of your capital gains taxes), but ideally you want to defer 100% of your taxes by making sure your replacement property goes up in these three categories.

Start Your 1031 Exchange Journey Today

Start you r1031 exchange journey today by calling the qualified intermediaries at CPEC1031, LLC. With over twenty years of experience under our belts, we have the knowledge and expertise needed to take your 1031 exchange across the finish line. Our team is ready and waiting to answer all of your questions about section 1031. Let us help you reap the tax-saving benefits of a 1031 exchange of real estate. We work with clients all over the state of 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

3 Types of 1031 Exchanges to Consider

There are several different ways in which you can conduct 1031 exchanges of real estate. In this article, we are going to walk through three of the most common types of 1031 exchanges to consider when selling qualifying property.

Forward Exchanges

This is the most common type of 1031 exchange in which a taxpayer sells a relinquished property, and then with the following 180 days acquires a like-kind replacement property, all while deferring capital gains taxes.

Reverse Exchanges

The second most common type of exchange is the reverse exchange. What makes this type of exchange different is all in the name – the outcome is the same but the steps are done in reverse order. Instead of selling your relinquished property first (as you would in a forward exchange), you acquire your replacement property first in a reverse exchange. This is a great way to grab that perfect property before you’re able to sell your relinquished property.

Build-to-Suit Exchanges

Finally, build-to-suit exchanges are 1031 exchanges in which you construct improvements to your replacement property as part of the exchange. This type of exchange is great for people who have a replacement property that needs some work. It’s important to remember that any improvements made must be finished within the 180 day 1031 exchange time frame.

Minnesota 1031 Exchange Professionals

The Minnesota 1031 exchange professionals at CPEC1031, LLC have over twenty years of experience facilitating forward exchanges, reverse exchanges, build-to-suit exchanges, and more! We can help carry your exchange across the finish line and make sure you are able to defer 100% of your capital gains tax burden. Contact our team of professionals today to set up a time to chat about the details of your next exchange. Our main office is located in 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