Is It Possible to Change Your Identified Property After Day 45 of Your 1031 Exchange Period?

Many taxpayers have questions about the identification period in a 1031 exchange. In this article, we are going to tackle the question of whether or not you can make changes to your identified replacement property after the 45th day of your exchange.

Identification Rules

The quick and easy answer to this question is no. After the 45th day of your identification period, you cannot make any changes to your identified property without cannonballing your exchange. That means you cannot identify new property, or change anything about the property you previously identified. The identification period rule is hard and fast – the IRS doesn’t allow any wiggle room on it.

Plan Ahead

The strictness of this rule further underlines the importance of planning ahead when it comes to your 1031 exchange. 45 days is not a lot of time. You want to make sure you have all of your ducks in a row before you begin the exchange process. You can also lock in your replacement property first, before selling your relinquished property, by doing a reverse exchange. Whatever you’re considering, it’s a good idea to consult with a qualified intermediary about your options and the best course of action.

Contact Us Today

A 1031 Exchange can help you defer capital gains taxes when selling real estate. The best news is that this section of the Internal Revenue Code is available to all United States taxpayers. The qualified intermediaries at CPEC1031, LLC can help you through all the stages of your exchange. Give our intermediaries a call today to learn more about the various services we offer and how we can help you save money on taxes. Our office is located in downtown Minneapolis, but we provide services to clients in many 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

How to Effectively Deal with Taxable Boot in a Like-Kind Exchange

Boot is a big deal in the realm of 1031 exchanges, but many taxpayers don’t pay enough attention to it, and end up paying the price (literally). In this article, we are going to talk about how to deal with taxable boot in a 1031 exchange.

A Brief Refresher on Boot

First, let’s make sure we’re all on the same page when we use the word “boot.” In a 1031 exchange, boot refers to any non like-kind property received during the course of a 1031 exchange. Typically, boot comes in the form of cash. When a taxpayer receives any cash proceeds during their 1031 exchange, they are deemed to have received boot and will be taxed accordingly. In general, you want to avoid boot at all costs in a 1031 exchange.

Dealing with Boot

Boot is a complex topic but the most important thing to remember is you do NOT want to receive any boot at any point during the 1031 exchange process. So how do you avoid boot? By following the strict regulations of section 1031 of the Internal Revenue Code. This is where a qualified intermediary can be invaluable in helping you through your exchange.

Defer Your Capital Gains Taxes

In a 1031 exchange, you can defer your capital gains taxes when selling a piece of investment real estate. But it’s not quite as easy as it sounds. You need to satisfy a number of requirements in order to have a successful 1031 exchange. This can all get a bit complicated, but with the help of a qualified intermediary, your exchange can go off without a hitch! Contact our intermediaries today to learn more about our services and to set up a time to chat about your exchange. You can find us at our primary office 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

A 1031 Exchange is a Balancing Act

Balance is an essential element in any 1031 exchange. An imbalance can result in only a partial exchange, or the complete failure of your property exchange. There are a several things you need to keep in mind so that your like-kind exchange remains balanced In this article, we are going to offer up some tips for balancing your 1031 exchange.

Reinvestment

First of all, you need to remember to reinvest all of the proceeds from your sale into your new replacement property. Many taxpayers feel tempted to pocket some of these proceeds, but any proceeds that you receive will result in boot that you will need to pay taxes on. Keep your hands off of these net proceeds and reinvest 100% of them into your replacement property.

Value Replacement

Make sure that your replacement property is of equal or greater value than your relinquished property. You always want to exchange up, not down.

Debt Replacement

Finally, you need to ensure that the debt you are taking on with your replacement property is equal to (or greater than) that of your relinquished property. If it is not, pay the difference in cash at the closing table.

Do a 1031 Exchange on Your Property

A 1031 exchange can be very beneficial from a tax point of view. It’s something you should always consider when selling investment real estate. Talking through your options with a qualified intermediary is a great way to wrap your head around the process and benefits of a 1031 exchange. At CPEC1031, LLC, our intermediaries have twenty years of experience in the 1031 exchange industry. We can walk you through every step of the 1031 exchange process. Give us a call today to learn more and chat with our team about 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

What are the Consequences of Failing to Identify Your Replacement Property within Your 45 Day Identification Period?

1031 exchanges are governed by strict time frames. But sometimes taxpayers may miss a deadline, bringing the entire exchange into question. In this article, we are going to talk about what happens if you fail to properly identify your replacement property before the 45th day of your identification period.

Identification Period

First, it’s important to remember that you only have a set amount of time to complete your 1031 exchange. Once you begin the exchange process by selling your relinquished property, you only have 180 days to complete your exchange. The first 45 of those days are your identification period in which you must identify in writing the replacement properties that you intend to exchange into. So what happens if you don’t give written identification of a property within this period?

Failure to Identify

Unfortunately, the IRS is very strict about the timelines set out in section 1031. If you fail to identify replacement property within your 45 day identification period, your exchange will fail and you will be subject to capital gains taxes on the sale of your relinquished property. There’s really no salvaging the exchange at this point, so it’s essential to work ahead to avoid this potential pitfall.

Get Your Exchange Started

It’s never too early to get started on your 1031 exchange of real estate. The earlier you begin preparing for your exchange, the great chance of success. The qualified intermediaries at CPEC1031, LLC have two decades of experience facilitating 1031 exchanges of all shapes and sizes. Our team can answer all of your questions, advise you on properties, and prepare your like-kind exchange documents. Give our intermediaries a call today to learn more about how we can help you with your 1031 exchange of 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

The Important Difference Between Realized Gain & Recognized Gain

Gain is an important concept in a 1031 exchange. But what many taxpayers aren’t aware of is that there are various different types of gain. Most importantly, there is a big distinction between realized gain and recognized gain. In this article, we are going to talk about the difference between recognized gain and realized gain in a like-kind exchange.

Recognized Gain

Recognized gain is the taxable portion of your realized gain. When you’re selling a piece of property in a traditional sale, your recognized gain and realized gain are often the same. This is not true in 1031 exchange transactions, because a 1031 allows you to defer your capital gains tax liability. As a result, it’s very important to distinguish between recognized gain and realized gain so you know exactly what you’re dealing with as you move forward with the sale of a property.

Realized Gain

When a taxpayer sells a piece of property, the benefit they receive is their realized gain. Your realized gain is the same whether you’re selling a piece of property outright, or in a 1031 exchange. To calculate your realized gain, take the property sale price and subtract your closing costs, as well as your adjusted tax basis.

Contact a 1031 Intermediary

The first step in any 1031 exchange is to contact a qualified intermediary to discuss your options. An intermediary can examine your situation and advise you on the best way to move forward. At CPEC1031, LLC, our qualified intermediaries have more than two decades of experience helping taxpayers through their 1031 exchanges. We’ll help you put together your 1031 exchange documents and advise you on replacement properties. Contact us today at our office (located in downtown Minneapolis) to get started with your 1031 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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved