Consolidating Commercial Properties with 1031 Exchanges

If you own a lot of little invest properties, your energies are spread over a bunch of different properties over a broad geographic space. That’s a lot of furnaces, and roofs, and properties to keep an eye on.

The Benefit of 1031 Exchanges

Many investors use 1031 exchanges to sell a bunch of little relinquished properties and consolidate that money into one centralized replacement property. If your primary business is to be a real estate broker but you happen to own a bunch of little multifamily housing units, why not sell those little multi-family housing units and purchase an office building in which you can put your real estate brokerage company and maybe still have some space to rent out to a title company, or a mortgage processing company so that you can really focus your equity and your attention on your core business, which is being a real estate broker.

Selling a bunch of little relinquished properties, and pooling those proceeds into one centralized property allows you to focus your attention and maximize the efficiency of your operation.

• 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

How a 1031 Exchange Can Benefit Anyone

Many people who are thinking about selling real estate want to know how exactly doing a 1031 exchange can be a beneficial course of action. In this article, we will explain how a 1031 exchange of real estate can benefit you.

Avoid a Big Tax Bill

When preparing to sell a piece of real estate, many investors hesitate when they realize just how much they are going to be liable for in capital gains taxes. This is where a like-kind exchange can benefit you. By 1031 exchanging your real property, you can avoid this big capital gains tax bill by deferring your gains.

Put Your Money to Work

By deferring your capital gains taxes and not having to write a big check to Uncle Sam, you are able to keep your money working for you in a continued investment. In a 1031 exchange, you don’t get to just pocket the net proceeds that would have otherwise have gone to the government in taxes. Rather, you need to move those proceeds into a continued like-kind investment. This allows you to compound and build your wealth over time by keeping your money working for you.

Defer Your Capital Gains Tax

A 1031 exchange is the best way to defer your capital gains taxes when you sell real estate. However, in order to defer all of your gains you have to meet certain benchmarks and follow specific rules. This can get complicated if you’ve never done it before. That’s why it’s important to hire a qualified intermediary as early as possible in the exchange process. Contact a 1031 exchange company today to see if your property qualifies for 1031 treatment.

• 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

After Starting a 1031 Exchange, Do You Have to Purchase the Replacement Properties?

One of the most common questions regarding 1031 exchanges is – what happens if you change your mind after starting the process? If you’ve already begun the 1031 exchange process, do you need to go through with it?

Options After Starting the Exchange

The short answer is no. By setting up the 1031 exchange with the qualified intermediary you are keeping your options open to potentially completing an exchange (and deferring the gains), but you are not obligated to buy any replacement properties. After the closing of the relinquished property, you will have 45 days to designate or identify in writing the potential replacement properties, and if you do not designate any properties, then the 1031 exchange will fail, and the unused exchange funds will be returned to you on the next business day.

If you do designate some potential properties, then you will continue to keep the your options open to potentially completing an exchange as to those designated properties that you listed for the remainder of the exchange period (180 days). Any remaining unused exchange funds will be returned to you on the next business day after the 180th day has elapsed.

Both the 45-day identification period and the 180-day exchange period run from that day after closing of the relinquished 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

Best Practices for Allocation in a 1031 Exchange

In this article, we are going to discuss some best allocation practices when selling a business or real property in a 1031 exchange.

Best Allocation – Sale of Business / Real Property

The first place to start is to drill-down on the value (or price) allocated to the real property, the amount of remaining debt on the property and the current adjusted basis on the real property. If you can allocate to the non-real estate components a price that is close to the remaining basis in the good will and personal property, then you may be able to increase the tax efficiency and defer more of the gains on the overall sale.

It’s always a good idea to involve your CPA in the discussion as well to determine the best allocation strategy for your situation.

CPEC1031, LLC

At CPEC1031, we are dedicated to providing the best possible services to our clients. Over the course of our decades in the industry we have built up a reputation as the professionals in commercial transactions. Let us put our experience to work for you on your transaction. Contact us today to learn more about the services we provide and how we can help. Our main office is located in downtown Minneapolis, but we work with clients across 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

Is it Possible to Partially Cash Out Your 1031 Exchange

With the current strength of the real estate market, many real estate investors face steep capital gains taxes when selling property. That makes 1031 exchanges very attractive as they allow a taxpayer to defer those capital gains taxes so long as you move all of your proceeds into a new property. But some taxpayers may want to pocket some of those net proceeds in addition to deferring their taxes. Is it possible to have the best of both worlds? In this article, we are going to talk about whether or not it’s beneficial to do a partial cash-out on your 1031 exchange.

Cash Boot

The short answer is, yes – it is possible to do a partial 1031 exchange and pocket some of the sales proceeds. But remember, any cash that you receive during the 1031 exchange process is considered boot and is subject to capital gains taxes. The amount of cash boot you receive and whether or not it will still be beneficial to conduct an exchange depends on your specific property and situation. It’s important to consult with your tax advisor before making a decision.

Real Estate Exchanges in MN

Real estate exchanges are great for individual taxpayers (because they allow you to defer capital gains taxes), as well as the economy as a whole. Any US taxpayer can avail themselves of the benefits of section 1031, so it’s always worth considering when you’re looking to sell real estate. With twenty years of experience, our team has the skills needed to accomplish the goals of your 1031 exchange. Contact our qualified intermediaries today to learn more about our services and to set up a time 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.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved