3 Frequently Asked Questions About 1031 Exchanges

1031 exchanges are complex and many people have questions about how they work. In this article, we are going to answer three of the most frequently asked questions about 1031 exchanges.

Why Should I Consider a 1031 Exchange When I Could Just Sell My Property?

If you sell your property in a typical transaction, you will be required to pay capital gains taxes on the sale. Depending on the property involved, this can be a sizeable bill. A 1031 exchange allows you to defer those capital gains taxes and put that money into a continued real estate investment.

What is a Qualified Intermediary & Why Do I Need One?

A qualified intermediary is a professional who specializes in the facilitation of 1031 exchanges. Your qualified intermediary will be able to advise you throughout your exchange, prepare your 1031 exchange documents for closing, and also insulate you from receiving any of the net proceeds from your sale. Working with a qualified intermediary is perhaps the best way to ensure a successful exchange.

How Long Do I Have to Complete my Exchange?

There are two important deadlines to remember with any 1031 exchange. The first is 180 days. You have 180 days total to complete your exchange. The next important deadline is 45. The first 45 of those 180 days are set aside as your identification period. This is the period of time in which you need to identify your replacement property.

Real Estate Exchange Company

1031 real estate exchanges allow you to save money on taxes and keep your money compounding and building wealth in a continued investment. The qualified intermediaries at CPEC1031, LLC have twenty years of experience in the 1031 exchange industry. We work with clients through every stage of the 1031 process, prepare all the requisite documents, and answer any questions that arise along the way. Contact us today to set up a time to chat with one of our qualified intermediaries and learn more about how you can defer your capital gains taxes on the sale of your real property.

• 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

Can You Change Your Identified Property Late in the 1031 Exchange Process?

We get a lot of questions from clients about their 1031 exchanges. Recently, we had a client ask if they could make changes to their identified replacement property after their identification period had ended. That’s the topic we’ll be diving into in this article.

Identification Period

As we’ve discussed before, you have two important timelines to remember in a 1031 exchange. The first is the overall 180 day time period for your exchange. You must complete your exchange no later than 180 days after it begins. The second essential time period is the 45 day identification period. This is the first 45 days of your total 180 day exchange period. Within these 45 days you need to identify in writing the replacement property or properties that you intend to exchange into. That sounds pretty simple, but what if you want to make an amendment to your identification after day 45? Can you do that?

Unfortunately, no. The 45 day identification period is very strict. You are not allowed to make any changes to your replacement property identification after day 45 of your identification period. For that reason, it’s important to make sure you have all of your bases covered in advance of your deadlines.

Qualified Intermediaries in the Twin Cities

Consider a 1031 exchange if you want to defer capital gains taxes on the sale of your real estate. At CPEC1031, LLC, our intermediaries have two decades of experience working on 1031 exchanges with clients in Minnesota and around the country. We can help you with all the aspects of your 1031 exchange – advising you and preparing all the necessary documents along the way. Realize the tax-saving benefits of a 1031 exchange today by setting up a time to chat with one of our intermediaries at our downtown Minneapolis office.

• 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

What to do if your Property is Disqualified from 1031 Exchange Treatment

1031 exchanges are an effective method for deferring your taxes when selling real estate. However, not all property qualifies for 1031 exchange treatment. It’s important to understand what property qualifies before diving into an exchange. In this article, we are going to talk about the types of property that are disqualified from 1031 exchange treatment.

Property Held for the Wrong Use

The most fundamental rule that governs 1031 exchanges is the qualifying purpose rule, which states that all property involved in a 1031 exchange transaction needs to be held for a qualifying purpose. Essentially, any property used in a 1031 exchange has to be held for investment purposes or for use in your trade or business. That means property held for personal use (such as your family home) is disqualified.

Personal Property

Items of personal property are also excluded from 1031 exchange treatment. This is a relatively new change that came about with the passage of the Tax Cuts & Jobs Act, which excluded personal property exchanges. Taxpayers are no longer allowed to exchange aircraft, business equipment, artwork, gold coins, or other items of personal property. Only real estate is eligible for 1031 exchange treatment (at the time of this writing).

1031 Exchange Services in MN

At CPEC1031, we approach each and every 1031 exchange transaction with the unique attention that it needs. Our qualified intermediaries have over twenty years of experience facilitating exchanges of real estate in Minnesota and across the country. If you are exchanging property under section 1031, we can help you with every aspect of your exchange – from preparing documents to answering your questions, and more! Contact us today to learn more about the 1031 exchange services we provide and get your exchange off the ground.

• 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

Is the End of the 1031 Exchange Approaching?

The 1031 exchange has been around since 1921 and has been through many overhauls of the tax code. Over the years, politicians from both parties have attempted to weaken or repeal this crucial part of the tax code. In this article, we will offer a brief history of the 1031 exchange and discuss why it’s important to keep it in the tax code.

A Brief History

In 1918, the United States adopted the first US income tax. Only a few years later, Congress recognized that individuals and businesses who reinvest the proceeds from a sale should not be taxed. In other words, if a taxpayer reinvests their funds to a new property rather than receiving those funds, they should not be taxed because they haven’t received anything. This mindset has persisted for nearly 100 years.

In 2017, the Tax Cuts and Jobs Act was passed. This bill partially weakened section 1031 by eliminating exchanges of personal property. Thankfully, the bill kept in tact exchanges of real estate.

Presidential Candidate Joe Biden’s proposal includes eliminating 1031 exchanges for investors who earn more than $400,000 per year. This would, in part, help fund his “Caring Economy” plan that will cost an estimated $775 billion over the next 10 years.

Today

Past efforts to repeal section 1031 of the Internal Revenue Code have failed. However, that doesn’t mean that 1031 exchanges are bulletproof. We live in uncertain times. COVID is devastating our economy and politicians are searching for all possible methods for funding programs to prop up the economy as we weather this storm.

However, eliminating section 1031 would not be the cure-all that many politicians make it out to be. 1031 exchanges help stimulate the economy by encouraging real estate investors to move capital around and reinvest their money. If you remove this provision, many investors are going to stop reinvesting, resulting in economic stagnation.

• 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

What is the Real Value of a 1031 Exchange?

Many taxpayers have heard of the 1031 exchange, but don’t quite understand the real value of doing a 1031 exchange. In this article, we are going to discuss the value of a 1031 exchange of real estate.

The Real Value

The real value of a 1031 exchange of real property is that you get to defer your capital gains taxes that would have otherwise gone to the government. Instead of writing a check to Uncle Sam, you get to reinvest the net proceeds into a new property without having to pay capital gains taxes on them.

Depending on the location and size of your property, capital gains taxes on a standard sale can be quite a hefty sum – so much so that it may make you shy away from selling the property. That’s why exchanging your property in a like-kind exchange is a more tax advantageous route to take. You can defer those capital gains taxes, and keep your money working for you in a continued investment. Over time, you can continue to exchange up into newer and better properties – essentially deferring your capital gains taxes indefinitely.

1031 Exchange Services in MN

At CPEC1031 we offer 1031 exchange services to taxpayers in Minnesota and across the United States. With more than two decades of experience, our intermediaries have the skills needed to guide you through your transaction and ensure your exchange is 100% tax-deferred. We can prepare your documents, answer your questions, and advise you every step of the way! Reach out to our qualified intermediaries today to get your 1031 exchange up and running. Our main office is located in downtown Minneapolis, but we work with clients throughout 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved.