What you Need to Know About 1031 Exchanges & Disregarded Entities

Can I buy a 1031 exchange property in a trust, LLC, or other entity that is considered to be a disregarded entity?

Disregarded Entities

The nice thing about disregarded entities is that they are pass-through, flow-through entities. It’s as if the taxpayer that wholly owns the LLC or other entity is the actual owner of the property for tax purposes.

That means that if you own the relinquished property in a trust or LLC or other entity that is wholly owned by you and effectively you are the owner of it for tax purposes, you as an individual can acquire the replacement property to complete your 1031 exchange, either in your own individual name or a new disregarded entity owned by you.

Revocable Living Trusts & LLCs

Here are some situations where you may have a disregarded entity. In a revocable or living trust that operates under your social security number, you are considered the owner of that property. Another situation is LLCs that are wholly owned by you. These are situations in which you should talk with your tax adviser to make sure that these entities are disregarded, flow-through entities and essentially just extensions of yourself.

• 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

A Few Tips for Revoking Identified Property in a 1031 Exchange

Can a taxpayer revoke his or her 1031 exchange property identification at any point during the exchange period? That’s the topic for today’s article.

How to Revoke Identified Property

The short answer is yes (if you are within the first 45 days of the exchange period). During the first 45 days you can identify your replacement properties in writing and you can also revoke your replacement properties.

But the revocation also needs to be in writing and signed by the taxpayer and sent to the intermediary (or other party that you previously identified to) within that 45 day period. After the 45th day has elapsed, it’s too late to revoke, amend, or otherwise change your identification, and you’re locked into whatever you identified during the first 45 days.

Save Taxes with a 1031 Exchange

If you’re looking to save taxes on the sale of real estate, look no further than the 1031 exchange! A like-kind exchange can help you defer taxes and keep your hard-earned money working for you over time. At CPEC1031, our intermediaries have been facilitating exchanges for taxpayers throughout Minnesota and around the country for decades. Give us a call today to learn more about 1031 exchanges, and how you can use them to save money when selling 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

Section 1031 of the IRC – A Tax Deferral Opportunity

Section 1031 is an excellent tool that can be used for tax deferral by any US taxpayer. But many taxpayers aren’t aware of this opportunity. In this article, we are going to highlight how section 1031 of the Internal Revenue Code offers an opportunity for tax deferral to all taxpayers.

Deferring Taxes on the Sale of Real Estate

1031 exchanges of like-kind property allow any US taxpayer to defer their capital gains on the sale of real property. The catch is that the exchanging taxpayer has to take all of their net proceeds from the sale and move them into a new replacement property – thus continuing that taxpayers real estate investment.

An Incentive to Invest

The 1031 exchange was created to incentivize real estate investors to continue investing (thus spurring the economy) rather than just selling and taking the sales proceeds. 1031 exchanges are not loopholes or “tricks” as some people believe. They were created by the United States government to increase economic growth by incentivizing real estate investors.

Minneapolis Like-Kind Exchange Company

At CPEC1031, we are focused on providing top-notch service to taxpayers looking to engage in 1031 exchanges of real estate. For the past 20 years, our qualified intermediaries have been helping taxpayers at all levels facilitate the deferral of taxes on the sale of real property. We can prepare all of your 1031 documents and answer all of the questions you may have about your like-kind exchange. Contact us today at our downtown Minneapolis office to learn more about our services and get your exchange started.

• 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

How to Make Sure You Defer 100% of Your Capital Gains Taxes in a 1031 Exchange

In an ideal world, all 1031 exchanges would result in 100% tax deferral. Unfortunately, that’s not reality. Due to a variety of factors, 1031 exchanges often result in partial or zero tax deferral. In this article, we are going to offer three tips for making sure you defer 100% of your capital gains taxes in a 1031 exchange.

Watch Your Deadlines

One basic reason why some 1031 exchanges fail is that they do not meet the necessary deadlines. Remember that you need to complete your 1031 exchange within 180 days. If you acquire your replacement property outside of that timeline, your exchange will fail and you will not be able to defer any of your capital gains.

Keep an Eye on Your Value, Equity & Debt

Another steadfast rule is that your replacement property needs to go up in value, equity, and debt compared to your relinquished property. If you do not meet this benchmark, you may only receive partial deferral.

Avoid Boot

Receiving any amount of cash proceeds during the exchange process will trigger taxable boot. You want to avoid this at all costs in order to defer 100% of your taxes.

Real Property Exchanges Under Section 1031

Deferring taxes on the sale of real property is easy under section 1031 of the Internal Revenue Code. At CPEC1031, we have more than twenty years of experience working with clients all over the state of Minnesota and beyond with their exchanges of real estate. Reach out to our intermediaries today to learn more about the 1031 exchange process and how we can help with your next transaction.

• 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

Can Your 1031 Exchange Intermediary Be From a Different State?

A common question we get from 1031 exchange clients is whether or not the qualified intermediary needs to be located in the same state in which you are conducting your 1031 transaction. For example, if you are conducting a like-kind exchange of real estate in California, can you hire a Minnesota qualified intermediary to facilitate your exchange?

Qualified Intermediary Location

The beautiful thing about section 1031 of the Internal Revenue Code is that it is a federal statute and applied uniformly (at least at the federal level) among all of the states.

So a qualified intermediary doesn’t need to be located in the state where your sale is occurring or for that matter in the state where your replacement property is to be acquired.

Local Customs & Practices

That being said, qualified intermediaries do need to be familiar with the customs and practices where the real estate transactions are occurring but do not need to be physically located in that vicinity in order to service and facilitate the 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