Many taxpayers want to defer their capital gains taxes with a 1031 exchange, but don’t have a great concept of the rules that need to be met in a successful 1031 exchange. In this article, we are going to offer up several tips to avoid pitfalls and make sure your 1031 exchange is effective!
Before You Close, Sign Your Exchange Documents
Your exchange documents must be signed on or before the date that you sell your relinquished property. If you fail to sign these documents before selling your property, it’s too late to conduct an exchange.
Acquire the Replacement Property
The same taxpayer that sold the relinquished property needs to acquire the replacement property. Keep that in mind when setting up your exchange.
Be Careful with Expenses
There are a lot of potential pitfalls when it comes to paying expenses with exchange proceeds. In short, some expenses can be paid with the net proceeds, and others will result in taxable boot and only a partial 1031 exchange.
Make Security a Priority
Since this is a real estate transaction, it’s important to make sure your exchange funds are secured every step of the way. Make sure your intermediary is financially reputable.
Like-Kind Exchange Process Explained
If you’re confused about the like-kind exchange process, don’t hesitate to reach out to one of our 1031 exchange professionals. CPEC1031has been helping taxpayers throughout Minnesota and across the country with their exchanges for more than twenty years. We have the experience needed to ensure your exchange is successful. Contact us today to learn more about the exchange process and whether your property qualifies for capital gains tax deferral.
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.
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