Video – Can You Buy 1031 Exchange Replacement Property in a New LLC?

If you sold your 1031 relinquished property in your own individual name, can you buy the replacement property through an LLC? Perhaps you want the LLC for liability, privacy, or maybe your lender is requiring it.

The answer is yes, you can buy in an LLC. However, that LLC cannot change the continuity of investment in that the same taxpayer that sold the relinquished property has to be the same taxpayer that acquires the replacement property. So if you own 100% of the LLC and the LLC is properly set up as a disregarded entity, it would be transparent for tax purposes. That’s a great way to acquire your replacement property in an LLC and not mess up your 1031 exchange.

Replacement property may be received by a taxpayer via a single member LLC that is disregarded as an entity separate from its owner (unless it elects to be taxed as an association). Reg Section 301.7701-2 and 3. The sole owner of an LLC which is disregarded for tax purposes is in the same position economically as if he/she had taken title in his/her own individual name. See Ltr. Ruls. 9751012 and 9807013. See also Schinner, "IRS Rulings Expand Opportunities for Using Single-Member LLCs in 1031 Exchanges," 88 JTAX 286 (May1998).

When an LLC is disregarded for tax purposes, the sole owner is in a similar economic position as if they had owned the property in their own individual name. This information is supported by Letter Ruling 9751012.

Defer Capital Gains Tax with a 1031 Exchange

Defer your capital gains taxes with a 1031 exchange and keep your money working for you in a continued investment! Like-kind exchanges are available for any US taxpayer to use. However, you need to be sure you’re meeting the 1031 exchange guidelines in order to defer your capital gains tax burden. The best way to do that is to work closely with a trusted qualified intermediary on your exchange. The intermediaries at CPEC1031, LLC have been facilitating exchanges for over twenty years. We can help you navigate the 1031 exchange process and defer your 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Video – Debt Offset When 1031 Exchanging into a DST

Do you have to worry about debt relief when you’re buying into a DST? Let’s say you paid off a mortgage on the sale of your traditional physical real estate – how do you factor in that ascension in wealth that you just enjoyed on the sale?

When you’re buying a DST (Delaware Statutory Trust), if that investment has debt already in the underlying assets that are inside of the DST, you as a purchaser of the beneficial interest in that DST are not only deemed to own the underlying real estate – you’re also allocated whatever apportionment of debt is fractioned off for your portion of the purchase.

So you can offset your debt relief from the sale of your relinquished property if you buy into a leveraged DST and you can be allotted enough debt as a part of that purchase. The problem is, with higher interest rates, more and more DST sponsors are doing low or no leverage, all-cash DSTs, which do not lend themselves well to taxpayers who are selling higher leveraged physical real estate. So there can be a mismatch in the ratio of debt that you may or may not be accorded as part of your purchase. This is where having a qualified intermediary, accountant, and financial planner comes into the equation.

Find a Qualified Intermediary Near You

Find a qualified intermediary near you who can help you navigate the 1031 exchange process efficiently and effectively. With over twenty years of experience, CPEC1031, LLC is your go-to resource for all things 1031 exchange. Contact us today to learn more about the process, our services, and the many benefits of the 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Video - Who Do You Report to When Identifying a 1031 Exchange?

In a 1031 exchange, who do you report your identification and the details of your exchange to? Additionally, who makes sure that you’re hitting all your required benchmarks?

Typically, most people doing a 1031 exchange identify their properties to their qualified intermediary.

Who makes sure you are hitting all of the benchmarks and satisfying all the requirements of a 1031 exchange? Essentially that is the taxpayer’s responsibility. When you drive down the highway you have to stay in your lane to avoid hitting other cars. The same goes for 1031 exchanges. You need to know where those line markers are. There are members of your 1031 exchange team (your tax attorney, accountant, etc.) that can help ensure that you are staying within the bounds of these requirements.

• 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

Video - Treasury Regulations: A Brief Overview of the 1031 Exchange Treasury Regulations

The Treasury Regulations that were written to govern the 1031 exchange industry set forth several safe harbors for facilitating delayed 1031 exchanges. Before these regulations were issued there were all kinds of crazy arrangements to create an exchange. The qualified intermediary modality has become the dominant 1031 safe harbor.

What is a qualified intermediary? Is it a person that can give you tax and legal advice? No. It needs to be a person that is unbeholden to the taxpayer conducting the exchange. Your agent, relative, attorney, accountant, etc. would all be excluded from becoming your qualified intermediary. Essentially, a qualified intermediary is a third party administrator who facilitates exchanges of real estate.

It takes a village to raise a 1031 exchange. You need to involve your entire team in the process. Your banker, accountant, real estate broker, title company, and qualified intermediary are all essential aspects of your 1031 team. This team will help you make the most informed decisions throughout your 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

Video - Does the 180 Day Timeline Apply to a Reverse Exchange?

There are two ways to conduct a reverse 1031 exchange. Under the safe harbor in Rev. Proc. 2037, you’re capped at parking the property at 180 days. This is a very friendly safe harbor, under which you can manage construction, arrange for financing, advance the funds to the qualified intermediary, and more. The downside is it’s capped at 180 days.

What if you want to do a reverse construction exchange and you want to build the Taj Mahal of improvements. Can you get that done in 180 days? Probably not. In this scenario, you may want to enter into a parking arrangement that goes beyond 180 days – outside of the safe harbor.

There’s a notorious case called Estate of Bartell in which the parking arrangement was something like 17 months. A drug store operator was going to move their operation from an interior strip mall location to an external pad site location. They wanted to build brand new improvements to their exact specifications. The intermediary holding title really had no risk. The IRS attacked this non-safe harbor transaction because they said the intermediary’s entity didn’t have any risk – it was merely a facilitator. The tax court essentially said: “so what?”

Non-safe harbor exchanges do not have the same certainty of tax treatment as safe harbor exchanges. You need to think long and hard about whether or not you want to step outside of that safe harbor.

• 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