1031 Exchange Tips for Building Wealth

1031 exchanges are a great vehicle for building wealth, but many investors aren’t aware of the wealth-building benefits of the like-kind exchange. In this article, we’re going to discuss how to build wealth with 1031 exchanges of real estate.

It’s All About Keeping Your Money Active

At the end of the day, building wealth is about keeping your money working for you in an active investment.

When you sell a piece of commercial real estate, you are responsible for paying the necessary capital gains taxes on that sale. But wouldn’t it be better to avoid writing that check to Uncle Sam and instead rolling those sales proceeds into a new property? That’s exactly what a 1031 exchange does for you. It helps you avoid a big tax bill and keeps your money compounding and building wealth over time in a continued investment. Who wouldn’t want that?

1031 exchanges exist in the Internal Revenue Code to encourage investment. Deferring capital gains taxes on the sale of real estate is a pretty sweet deal, and the IRS allows it as long as you meet the required benchmarks for 1031. This benefits the economy as a whole, as well as the individual taxpayer conducting the exchange who gets to watch their money continue to build wealth instead of cutting a check for the tax on the sale.

Qualified Intermediaries in Minnesota

We partner with the skilled qualified intermediaries at CPEC1031, LLC to provide our clients with top-notch 1031 exchange services when needed. The intermediaries at CPEC1031 have been facilitating exchanges for more than two decades in Minnesota and across the country. If you are interested in learning more about how you can save money on the sale of real estate, contact us today at our downtown Minneapolis office to learn more about the 1031 exchange process.

• 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 Methods for Securing Your Money in a 1031 Exchange

A 1031 exchange requires you to move all of the sales proceeds from your relinquished property over to your replacement property. You want to avoid receiving any of these funds during the process, because doing so will trigger taxable boot. So how to you ensure that your 1031 exchange funds are secure during your transaction? In this article, we are going to offer three tips for securing your funds in a 1031 exchange.

Separate Escrow Account

Working with a qualified intermediary is the best way to make sure your funds are safe and secure throughout the like-kind exchange process. Find a company that deals exclusively with 1031 exchanges. Your intermediary can set up a separate escrow account and have the net proceeds transferred into that account after the relinquished property closing. This is where the funds will remain until you are ready to acquire your replacement property.

Escrow Agreement

You should also have the bank enter into an escrow agreement with the intermediary that will lock down the funds unless you have co-authorization from you and the intermediary to withdraw.

Work with a Reputable Qualified Intermediary

Finally, you should make sure that your qualified intermediary has a Fidelity Bond and an errors and omissions policy so you have all of your bases covered.

Minnesota Exchanges of Real Property

CPEC1031, LLC works with clients in many different industries and states on their 1031 exchanges. Working with an intermediary on your exchange is one of the best ways to ensure a successful exchange. Our intermediaries have twenty years of experience facilitating exchanges in Minnesota and around the country. Contact us today to speak with one of our 1031 exchange professionals 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

Who can be Considered a Related Party in a 1031 Exchange?

Involving a qualified intermediary is an essential step in the 1031 exchange process. Your intermediary is the key to helping you avoid receipt of the sales proceeds so you can defer all of your capital gains taxes on your sale. Additionally, your intermediary acts as your guide and protects your interests during the exchange. But not everyone can act as your qualified intermediary. In this article, we are going to explain who is considered a related party in a 1031 exchange.

Related Parties

The IRS restricts “related parties” from acting as qualified intermediaries on a taxpayer’s 1031 exchange. But what exactly is a related party? Essentially, anyone who is related to the taxpayer by blood or business affiliation is not allowed to act as the qualified intermediary. Here is a list of related parties that would be barred from acting as your intermediary:

• Your mother, father, siblings, or other blood relatives

• Your employee

• Your accountant, lawyer, or CPA that has acted on your behalf over the past two years

Finding the right qualified intermediary is important. Look for someone who is well-reviewed, and well regarded in the industry. Someone with years of experience and specifically experience facilitating exchanges in your area is also a plus.

Save Money when Selling Real Estate

If you are looking to defer your taxes when selling real estate, a 1031 exchange is the tool you need. Our qualified intermediaries have been working with clients all over the country on their like-kind exchanges for the past twenty years. We can help you with your 1031 documentation, identification of replacement property, and more. Contact us today at our downtown Minneapolis office to learn more about our services and how we can help you save money on your next sale 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

What a Qualified Intermediary Does and Does Not Do in a 1031 Exchange

If you’ve heard of a 1031 exchange, you may have heard of a qualified intermediary. But many people don’t have a solid understanding of what an intermediary actually does. In this article, we are going to discuss the important role that the qualified intermediary plays in a 1031 exchange of real estate.

What is a Qualified Intermediary?

A qualified intermediary is a neutral third-party who facilitates like-kind exchanges of property under section 1031 of the Internal Revenue Code. There are many benefits to working with a qualified intermediary, including:

• Getting Your Questions Answered. Your intermediary will be on hand to answer any questions you might have throughout the process.

• Preparing Your Documents. There are a lot of documents you need to bring to the closing table in a 1031 exchange. Your intermediary will prepare all of these documents to ensure a smooth closing.

• Insulating You From Proceeds. In a 1031 exchange, you cannot under any circumstances receive any of the sales proceeds from your relinquished property. If you do, you will need to pay taxes on those proceeds. A qualified intermediary can insulate you from receiving these proceeds by holding it for you in an escrow account before transferring it over into your new replacement property.

These are just a handful of the many benefits of having a qualified intermediary by your side during your 1031 exchange.

Twin Cities 1031 Exchange Company

At CPEC1031, we are fully equipped to facilitate your exchange of commercial property. Contact us today at our downtown Minneapolis office to get started with your 1031 exchange and start realizing the tax-saving benefits of a like-kind 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

Delaware Statutory Trusts & 1031 Exchanges – What You Need to Know

There are many options to consider when engaging in a 1031 exchange of real estate. In this article, we are going to talk about Delaware Statutory Trusts and how they can be utilized to your benefit in a 1031 exchange.

What is a Delaware Statutory Trust?

A Delaware Statutory Trust is a way of owning real estate. In a DST, there is a trustee appointed who is the figurehead owner of the property. The people who have invested in the trust (the beneficial owners) are not deemed to be owners of a trust for tax purposes. Rather, they are seen as owners of the assets within the trust. That means Delaware Statutory Trusts may be eligible for 1031 exchange.

Delaware Statutory Trusts & 1031 Exchanges

A Delaware Statutory Trust is a method for purchasing replacement property in a 1031 exchange. Here are some of the advantages of exchanging into a Delaware Statutory Trust:

• Passive Ownership – Not Management Intensive

• Portfolio Diversification

• Non-Recourse Debt (Typically)

If you decide to exchange into a DST, it’s a good idea to use the 200% rule, rather than the 3 property rule. Otherwise, the amount of properties in the Delaware Statutory Trust may exceed the requirements of the 3 property rule.

Delaware Statutory Trust Qualified Intermediaries

It’s important to work with a qualified intermediary if you are considering a 1031 exchange of real estate. An intermediary is your go-to resource for all things related to your exchange. They can prepare all of your required documents, answer all of your questions, and help you find suitable replacement property. At CPEC1031, LLC, our intermediaries have more than two decades of experience helping clients with their like-kind exchanges. Contact us today at our Twin Cities office to learn more about 1031 exchanges and how we can help!

• 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