Capital Gains Tax on Commercial Property – When You Owe & When You’re Exempt

If you’ve ever sold a piece of real property, you’re likely familiar with capital gains taxes. In this article, we are going to talk about capital gains taxes – when you owe them and when you’re exempt from them.

Capital Gains Taxes on Real Estate

Capital gains taxes are taxes imposed on the sale of certain assets – such as real estate. When you sell real estate in a standard transaction, you will owe capital gains taxes on that sale.

Defer Taxes with a 1031 Exchange

If you want to avoid a big capital gains tax bill when selling real estate – a 1031 exchange is your ticket! Like-kind exchanges allow you to defer your capital gains taxes on the sale of real property. In order to defer your taxes, you need to redeploy your sales proceeds into a new (bigger) replacement property, and meet various other requirements set out by the IRS. When done correctly, a 1031 exchange can help you avoid a huge tax hit. The biggest benefit is that you can keep your money working for you in a continued investment – building wealth over time.

Exchange Your Like-Kind Property

Like-kind exchanges can get complicated quickly. That’s why it’s important to work with a skilled intermediary on your exchange. The qualified intermediaries at CPEC1031 can help you through every stage of your exchange. We can advise you on replacement property, prepare your closing documents, and answer all of your questions. Give us a call today to set up a time to chat about your exchange. Our main office is in downtown Minneapolis, but we work with clients throughout 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

Examining the 1031 Exchange from the Inside Out

Successfully navigating a 1031 exchange often requires the help of a qualified intermediary who understands the process inside and out. Take it from someone who has been on the inside of countless exchanges – they can get complicated quickly. Your best defense against a failed 1031 exchange is a good offense. And there’s no better offensive coordinator than a qualified intermediary. In this article, we are going to offer a look at the 1031 exchange from the inside out.

Prepare Yourself

When we see 1031 exchanges fail, most of the time it’s a direct result of unpreparedness. Many of the common pitfalls of 1031 exchanges can be easily avoided with enough foresight. That’s why the number one rule of 1031 exchanges is to prepare accordingly. Consult with a qualified intermediary early in the process to make sure your exchange is a success.

Work with a Professional

1031 exchanges are complex and unwary taxpayers can fall into potential traps that can derail their exchanges. Having a qualified intermediary by your side throughout the process is an excellent way to insulate yourself from the dangers of a 1031 exchange.

CPEC1031, LLC

If you are interested in exchanging your property under section 1031 of the Internal Revenue Code, contact CPEC1031 today. Our qualified intermediaries have been facilitating exchanges of real estate for more than twenty years. We have the knowledge and skills needed to handle your exchange. We can handle all the technical aspects of your exchange and prepare all of your necessary documentation. Contact us today at our downtown Minneapolis office to discuss the details of 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

When do you Have to Pay Capital Gains Taxes on 1031 Exchange Property?

Many taxpayers have availed themselves of the tax-saving benefits of the like-kind exchange. But as we’ve discussed before, a 1031 exchange allows you to defer your capital gains tax, not avoid it. So when do you need to pay that tax? In this article, we will explain when you need to pay your deferred capital gains taxes on 1031 exchange property.

Capital Gains Taxes

When you sell a property in a 1031 exchange and move your net proceeds into a new replacement property you are not required to pay those capital gains taxes. However, those taxes do not just disappear. If you sell your replacement property in a standard transaction at any point in the future, you will then have to pay the capital gains taxes on that sale.

Defer Until Death

When it comes to 1031 exchanges of real estate, the ideal long-term strategy is to defer your capital gains taxes until death. If you are ready to sell your replacement property at some point in the future, consider doing another 1031 exchange into a bigger property. That way you can keep your money working for you in continued investments, while avoiding capital gains taxes all your life.

Minneapolis 1031 Exchange

If you are getting ready to sell a piece of real estate, but are dreading the capital gains taxes, consider a 1031 exchange to defer those taxes. A like-kind exchange allows you to avoid a big tax bill on the sale of real estate so long as you move those net proceeds into like-kind property. Contact our Minneapolis qualified intermediaries today to discuss the details surrounding your like-kind exchange. We have been facilitating 1031 exchanges in the Twin Cities and around the country for decades.

• 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

Is it Possible to do a 1031 Exchange if You’ve Already Sold your Property?

We often hear from investors who sell property intending to buy other property, but are unaware of the rules and regulations of 1031 exchanges for deferring capital gains tax. If you’ve already completed your sale, can you still do a 1031 exchange?

Relinquished Property Sale

If the sale of your relinquished property has already occurred (the benefits and burdens of ownership have shifted and payment received) then you may have engaged in a closed transaction and may have recognized the gains if you have received the payment. You should talk to your own CPA or tax advisor who knows your specific situation.

Safe Harbor Exchanges

There are a number of requirements for conducting a safe-harbor exchange and requisite written notices that must be given to comply with the provisions of Section 1031 of the Internal Revenue Code.

Generally for a safe-harbor exchange, before the sale occurred you would have had to retain a third party administrator (often referred to as a qualified intermediary or facilitator) to step into your position as the seller, and to receive (and escrow) the net proceeds.

Prepare for the Closing

If you have already closed on your sale and conveyed the relinquished property to the purchaser, then it is too late for our company to assist you as a qualified intermediary. Our policy is to have an exchange agreement in place prior to the sale being completed, and to provide written instructions and notices to the parties involved in the 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 I File my Taxes Before Finishing my 1031 Exchange?

With tax season upon us, many taxpayers have questions about how and when to report a 1031 exchange on their return. This article answers some common questions about 1031 exchange tax reporting.

When to Report the Sale & Acquisition

If you sell a piece of property in a particular tax year, you probably don’t report that sale and the subsequent purchase of your replacement property until April 15th of the next year.

Well congress and the IRS have said that when a 1031 exchange crosses over into the new tax year you have 180 days normally to complete the exchange, but the 180th day is shortened down to the due date of the filing of your federal income tax return. The reason that they shorten the 180 day exchange period is that they don’t want to have to wait until the next year to see how this story unfolds with the acquisition of the replacement property.

Getting the Full Use of Your Exchange Period

So most taxpayers that file on April 15th but haven’t yet completed their 180 day exchange period will file for an automatic extension of the April 15th filing deadline, and move it out to October. The reason that they do that is they want to get the full use of their hundred and eighty days so they can acquire the replacement property. That way when they filed a tax return the whole story will be shown on form 8824. They’ll see the sale of the property first and then the acquisition of the replacement. You don’t want to send in your tax return before you’ve completed the circuit on the disposition and acquisition of your properties.

• 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