6 Tips for Executing a Successful 1031 Exchange

There are many steps to a 1031 exchange, but the process can be boiled down to 6 important milestones. In this article, we are going to walk through the necessary steps to complete a successful 1031 exchange of real estate.

Step 1 – What is Your Gain?

First of all, you need to determine whether or not it makes fiscal sense to do a 1031 exchange vs. and outright sale of your property. This involves calculating your potential capital gains taxes and how much you would save if you did a 1031 exchange.

Step 2 – Does Your Property Qualify?

Before you begin the process you also need to determine whether or not your property qualifies for 1031 treatment. In order to qualify, your property has to be held for investment or business purposes, not for personal use.

Step 3 – Contact a Qualified Intermediary

Once you’ve decided to do an exchange, you need to sign the purchase agreement for your relinquished property. If you haven’t already at this point, it’s time to contact a qualified intermediary so they can insert a cooperation clause into your purchase agreement.

Step 4 – Close on Your Relinquished Property

Next it’s time to close on your relinquished property. Be sure you have all of your required closing documents prepared. Your 1031 intermediary can prepare all of these for you.

Step 5 – Replacement Property Identification

Once you’ve sold your relinquished property, you have 45 days to identify in writing your replacement property.

Step 6 – Close on Your Replacement Property

Finally, you need to close on your replacement property within the 180 day exchange period.

CPEC1031 in Minneapolis, MN

The 1031 intermediaries at CPEC1031, LLC have more than two decades of experience working on 1031 exchanges of all shapes and sizes. Using our extensive experience, we can make sure your exchange goes off without any issues. We can also handle all the necessary document preparation and advise you on which replacement properties to identify. Contact our intermediaries today at our downtown Minneapolis office to learn more about our range of services and to get your 1031 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

4 Essential Terms to Know About 1031 Exchanges

There are many terms that crop up during a 1031 exchange of real estate. In this article, we are going to talk about the four most important 1031 exchange terms that you should know.

Like-Kind

The first, and most important term to familiarize yourself with is “like-kind.” All property involved in a 1031 exchange needs to be of like-kind. Thankfully, this is pretty easy when you’re dealing with real estate exchanges. Most US real estate is like-kind to most other US real estate.

Qualified Intermediary

A qualified intermediary is a 1031 exchange professional who helps guide taxpayers through the details of their 1031 exchanges. Think of a qualified intermediary as your 1031 exchange advisor. They can also prepare the documents necessary for your 1031 exchange.

Boot

Boot is defined as any non-like-kind property that the taxpayer conducting the exchange receives during the exchange process. Receiving boot will trigger gain and result in only partial tax-deferral. As a result, it’s best to avoid receiving boot when you can.

Qualifying Purpose

One of the other fundamental rules of a 1031 exchange is that your property must be held for a qualifying purpose. Only property held for use in your trade or business can be exchanged in a 1031 transaction.

Defer Your Taxes with a 1031 Exchange

A 1031 exchange is a fantastic way to defer your capital gains taxes on the sale of real property and keep your hard-earned money working for you in a continued investment. At CPEC1031, LLCwe work with clients across the country to facilitate their 1031 exchanges of real estate. Our qualified intermediaries have decades of experience executing 1031 exchanges and can walk you through every step of the process. Reach out to our like-kind exchange professionals today if you have any questions about your real estate 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

How Like-Kind Exchanges can Help Real Estate Investors

Investing in real estate can be a difficult and complex game, but one tool that every taxpayer has at their disposal for real estate investment is the 1031 exchange. Even so, many taxpayers are unaware of the benefits of the 1031 exchange or that they can avail themselves of tax deferral by way of a 1031 exchange. In this article, we are going to talk about how you can invest in real estate by using section 1031 of the Internal Revenue Code.

Defer Your Taxes, Continue Your Investment

A 1031 exchange allows any US taxpayer to defer their capital gains taxes when selling qualified real estate. Depending on the size of your property and other factors, capital gains taxes can add up to a pretty hefty bill. Sometimes this tax bill discourages taxpayers from selling their property because they don’t want to take the tax hit. But if you exchange your property in a 1031 transaction – rather than selling it outright – you get to defer these taxes and continue your investment in a new property. This allows you to avoid a potentially huge tax bill, and keep your money working for you and compounding interest over time in a continued investment.

Capital Gains Tax Deferral

At CPEC1031, LLC, we pride ourselves on our dedication to our clients. For the past two decades we have been facilitating exchanges of real property for taxpayers around the country. We can help you through each and every stage of the 1031 exchange process, and ultimately help you defer your capital gains taxes when selling real property. This allows you to keep that money working for you in a continued investment. Contact us today to learn more about our services and to get your 1031 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

The Benefits & Drawbacks of a 1031 Exchange

With any real estate transaction, there are advantages and disadvantages. In this article, we are going to look at some of the pros and cons of a 1031 exchange.

Pros of a 1031 Exchange

Here are some of the pros of doing a deferred exchange under section 1031:

• Tax Deferral. When you complete a 1031 exchange, you get to defer your capital gains taxes on the sale of your property.

• Compounding Interest. In a 1031 exchange, you get to defer your taxes and keep that money working for you and compounding interest in a continued investment that will reap benefits over time.

Cons of a 1031 Exchange

If you’re looking to save money on taxes, there really aren’t too many downsides of doing a 1031 exchange. There is one situation in which you may not want to consider a 1031 exchange, however:

• You Don’t Keep Your Proceeds. In order to complete a successful 1031 exchange, you need to move all of your sales proceeds into your replacement property. That means you don’t get to pocket any of these proceeds. If you’re strapped for cash, this can be one downside of a 1031 exchange.

Begin the 1031 Exchange Process

If you’re looking to begin the 1031 exchange process on a property you own, you’ve come to the right place. At CPEC1031, LLC, we have more than two decades of experience working in the1031 exchange industry. We facilitate real estate exchanges for clients throughout the state of Minnesota and across the country. Our intermediaries can help you prepare all of your documents for closing and advise you throughout the process. Contact us today at our Minneapolis office to learn more and set up a time to chat with one of our intermediaries!

• 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 Work with a 1031 Qualified Intermediary From Another State?

Many taxpayers conducting 1031 exchanges of real estate have questions about who to hire as their qualified intermediary. In this article, we are going to talk about the roles and restrictions of a qualified intermediary from a geographical perspective. Specifically, we’ll discuss whether your qualified intermediary can live in a different state from you and/or your property.

Intermediaries Across State Lines

Section 1031 is a federal statute that is applied to all 50 states. That’s how we are able to conduct exchanges for clients across the country. Your qualified intermediary can live and work in a completely different state and still facilitate your exchange. You can live in New York and hire an intermediary in Minnesota and it will be perfectly fine. In fact, it happens all the time!

All that being said, there are various state and local customs that can impact a like-kind transaction. It’s important to work with a qualified intermediary who has experience and knowledge in the location of your transaction.

Section 1031

The 1031 exchange professionals at CPEC1031, LLC have more than twenty years of experience facilitating exchanges for taxpayers in many different business segments. Our qualified intermediaries are your guides to exchanging property under section 1031. We can help you identify replacement property and prepare all of your necessary documentation. Contact us today to get your exchange started. Our primary office is located in downtown Minneapolis, but we work with clients throughout the Twin Cities, greater Minnesota, and across 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