Can you 1031 Exchange Into a Multi-Unit Property & Occupy One of the Units?

There are many questions that come up when it comes to 1031 exchanges of investment property. Here’s one that a client asked us recently: can you 1031 exchange into a multi-unit property and occupy one of the units? 

Combining Section 1031 & Section 121

This is a somewhat complicated situation. In an ideal world, you could split the transaction into a part IRC Section 1031 exchange and part IRC Section 121 sale of the principal residence (so you can exclude some or all of the gain from the principal residence).

The 1031 part is the portion or percentage of the property used exclusively for business or rental.

In order for the principal residence part of the property to qualify for the exclusion the part used for principal residence must meet both the: (1) ownership test and the (2) use test. One is eligible for the exclusion if they have owned and used that portion of the property as their main home for a period aggregating at least two years out of the five years prior to its date of sale. One can satisfy the ownership and use tests during different 2-year periods. However, one must meet both tests during the 5-year period ending on the date of the sale. Generally, a person is not eligible for the exclusion if they have excluded the gain from the sale of another home during the two-year period prior to the sale of the home.

• 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

3 Tips for Reducing Uncertainty in a 1031 Exchange

In any real estate transaction, there is some level of uncertainty involved, and 1031 exchange transactions are no exception. In this article, we are going to discuss how to reduce uncertainty in a 1031 exchange.

Work Closely with Your Qualified Intermediary

The biggest mistake a lot of taxpayers make when it comes to 1031 exchanges is trying to do everything themselves. The best thing you can do is work closely with a qualified intermediary who can walk you through the process and give you all the tools you need to execute a successful exchange.

Start As Early As Possible

In a 1031 exchange time can be your friend or your enemy. There are very strict deadlines that have to be followed in all 1031 exchanges so if you’re scrambling at the eleventh hour, time can really be against you. That’s why it’s best to start working on your exchange as early as possible. Give yourself more prep time than you think you need. Contact your intermediary early in the process and start putting a plan into place.

Line Up Your Replacement Property

Get ahead of the game and start lining up your replacement property early. Once you begin the process, you only have 45 days to identify your replacement property in writing. Doing a little bit of prep work can go a long way in this department.

Like-Kind Exchange Services

At CPEC1031, we offer 1031 exchange services to clients throughout the state of Minnesota and across the United States. Our intermediaries have over two decades of experience and can help you through every step of your transaction. Reach out to us today to learn more about the full range of our services and see how we can help you wit your next exchange. You can find us at our primary office in downtown Minneapolis or at one of our satellite offices around the 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

Tips to Protect Yourself from Fraud in a 1031 Exchange Transaction

Now more than ever, taxpayers need to take appropriate measures to protect themselves from fraud when engaging in a 1031 exchange transaction. In this article, we are going to offer up some tips to protect yourself from fraud when conducting a 1031 exchange.

Always be Extra Careful when Communicating via Email

There are a wide variety of fraud schemes that target people via email. It’s important to always be extra careful when communicating via email, especially when someone asks you to share personal information via email. If you get an email from your qualified intermediary or bank asking to approve a wire, for example, you should always call a verified number and confirm that the email is legitimate before proceeding.

Maintain Strong Passwords

Abiding by password best practices across all your online accounts is another great way to safeguard yourself from potential fraud. Make sure to use different passwords for each account you have. Use a password manager so you only have to remember one password.

Work with a Trusted Qualified Intermediary

Qualified intermediaries are not regulated by the federal government. As a result, there are some less than trustworthy intermediaries out there. Be sure to work with a qualified intermediary who has a proven track record and a lot of experience.

Our Minnesota Qualified Intermediaries are Here to Help!

At CPEC1031, our qualified intermediaries are here to help! We have over twenty years of experience working with clients on their 1031 exchanges or real property. We have the knowledge and experience to ensure the success of your next exchange. Don’t hesitate to contact us today to discuss the details of your next like-kind exchange and see how we can help you defer capital gains taxes when selling real estate.

• 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

COVID-19 Update – CPEC1031 Remains Open Remotely

CPEC1031 is here to help! We are open for business and ready to help you with your 1031 exchange during the COVID-19 pandemic.

Minnesota Gov. Tim Walz has issued a stay-at-home order to slow the spread of COVID-19 in our communities. As part of our commitment to the health and safety of CPEC1031 clients and team members, CPEC1031 has transitioned to fully-remote operations.

Please contact us for assistance regarding your legal questions and concerns, whether they involve COVID-19 or other issues. We can advise you over the phone or via video conference. Documents can be emailed securely or mailed to you.

We wish you health and safety during this time.

• 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

How COVID-19 Impacts 1031 Exchanges

The ongoing COVID-19 outbreak is causing a lot of uncertainty in all industries – and commercial real estate is no exception. Many people have questions about whether COVID-19 is disrupting the 1031 exchange process. In this article, we are going to discuss how the COVID-19 pandemic is impacting 1031 exchanges.

Deadlines & Timeframes

In a typical 1031 exchange, the taxpayer conducting the exchange has to abide by strict deadlines. Specifically, you only have 180 days to complete your exchange once you initiate the process. The first 45 of those days are set aside as your identification period in which you must identify in writing your replacement property.

There are rare circumstances in which these deadlines can be changed. IRS Revenue Procedure 2018-58 allows for these 1031 exchange deadlines to be extended in the event of a federally declared disaster, but only when the IRS releases guidelines authorizing this to go into effect. That has not happened yet as of the time of this writing, but taxpayers should keep their ear to the ground over the coming weeks and months to prepare for this possibility.

If a federally declared disaster is implemented and the IRS does issue guidelines on the topic, it’s a good idea to work closely with your qualified intermediary as there are additional qualifying requirements you must meet to extend your deadlines.

Jump Start Your 1031 Exchange Today

At CPEC1031, we work with clients across the country on 1031 exchanges of all shapes and sizes. Our qualified intermediaries have over two decades of experience facilitating like-kind exchanges and can help you prepare 1031 documents and advise you throughout the process. Contact us today to learn more about our full range of services and see if you are a good candidate for 1031 exchange. You can find us at our primary offices located in downtown 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved