Video – Transactional vs. Operational Expenses in a 1031 Exchange

In order to get your relinquished property sold, you had to spend some money to repair it and get it ready. Can you recoup those outlays that you made to fix up the property before its sale?

Generally, in a 1031 exchange you can only siphon off money to pay transactional expenses that are necessary like a real estate commission, state deed tax, recording fees, etc. Repair expenses are usually considered operational expenses. As a result, you probably don’t want to reach into the cookie jar for reimbursement of your operational expenses.

The only exception to that rule would be a situation in which the buyer extracts a concession from the seller in the purchase agreement that requires a certain repair as a material factor of the contract. In that case, the expense may be a transactional expense because it’s a requirement of the sale contract. This may also depend on how the concession is written in the contract so you need to surround yourself with a great team including your tax preparer, your real estate agent, and your qualified intermediary.

1031 Exchange Questions, Answered

Get all of your 1031 exchange questions answered by reaching out to a qualified intermediary at CPEC1031, LLC. We have more than twenty years of experience working on exchanges of real property under section 1031 of the Internal Revenue Code. We are here to help guide you through all the details of your next 1031 exchange and do everything possible to defer 100% of your capital gains tax burden.

• 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 – Consolidating Multiple Relinquished Properties into a Bigger Replacement Property

Let’s talk about consolidation. If you’re selling multiple relinquished properties in a 1031 exchange, can you take the proceeds from numerous sales and combine them together to buy one bigger replacement property?

The answer is yes. However, this comes with two challenges.

1. The logistics of trying to herd all of your cats together for those multiple sales to occur, thus allowing you to assemble your capital for the big purchase.

2. Accounting issues. You need to make sure that the replacement property is valued large enough that it can accommodate the proceeds from multiple sales. Generally you want the replacement property to be at least equal if not greater in value than the amounts realized from the multiple relinquished properties. Those amounts realized are the gross sale prices minus the transactional expenses such as commissions, recording fees, and other things that reduce the profit on the sale.

Remember, you can do a 1031 exchange to acquire a bigger and better property but you have to work out the logistics and accounting.

CPEC1031, LLC – Start Your Like-Kind Exchange

Start your like-kind exchange with CPEC1031, LLC today. We have more than two decades of experience working with clients throughout the United States on their 1031 exchanges. We facilitate exchanges of all types – from duplexes, to retail spaces, to large office buildings. As long as you own property held primarily for investment or business purposes you can benefit from a 1031 exchange. Contact our office today to set up a time to chat about the many benefits of section 1031 and how you can begin 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

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