How to Guarantee Title in a 1031 Exchange

Title insurance companies provide the assurance that you have purchased a property, that you are the owner of that property, and that you have marketable title. But how do you guarantee your title in a 1031 exchange?

Transactional Expenses

When acquiring replacement property oftentimes people are worried about the transactional expenses and they’re looking to cut expenses anywhere they can.

One place that you don’t want to cut back on is title insurance. When you go to sell your property in the future you’re going to want to have some proof that you’re the owner of the property and that it is free of liens, encumbrances, and title flaws that may have existed before you acquired the property.

Title Insurance Commitment

We highly recommend that in conjunction with the purchase of any replacement property you get a title insurance commitment that shows any adverse claims, any liens, any judgments that may encumber the property, and that you have those all cleaned off as part of the process of closing on your new replacement property.

CPEC1031, LLC

At CPEC1031, we have decades of experience facilitating 1031 exchanges across the country. You can find us at our main offices located in downtown Minneapolis. Don’t hesitate to reach out today to discuss the details of your next 1031 exchange 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

Investment or Business Properties Qualify for 1031 Exchange, But Be Careful with House Flips

One question a lot of taxpayers have when it comes to 1031 exchanges is “can I do a 1031 exchange on flipped property?” The short answer is no, but you there are other ways to structure your exchange in order to qualify.

Don’t Hold for Resale

You don’t want to be seen as holding primarily for “resale” because that will NOT qualify for 1031. The question becomes, are you holding the property for investment or business purposes or are you holding it for inventory for sale to the public?

The length of time a property is owned is but one of the many factors looked at to determine if you have held the relinquished property for the qualified purpose of investment or business purposes, as opposed to holding primarily for resale (flipping). One good year of rental is a good rule of thumb but the longer the better.

Having an unsolicited offer may be a good detail in this facts and circumstances analysis…if you go for a shorter hold period…but that’s perhaps more risky.

  • 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

Dealing with the S-Corp Issue in 1031 Exchanges

The S-Corp issue is a problem in a drop and swap 1031 exchange. In this article, we are going to discuss some of the issues that can arise when it comes to 1031 exchanges and S-Corps.

The S-Corp Problem

Why do S-Corps present an issue when dealing with a 1031 exchange? It is much more difficult to reconfigure the ownership of the relinquished property by distributing out tenant-in-common interests from a corporation because generally the value of the property that is distributed (that is not considered a dividend) is applied first to reduce the shareholder’s basis in the corporation’s stock. Any remaining portion is treated as gain from the sale or exchange of distributed property. This does not lead to a good result from a 1031 perspective.

If the owners are in a partnership, we have much better options when it comes to 1031 exchanges of property. As always, it’s a good idea to start early if you want to explore your 1031 exchange options. Reach out to a qualified intermediary today to discuss your options.

  • 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

Does Rental Property Qualify for 1031 Exchange Treatment?

How long does the property need to be rental property in order for the property to qualify under the 1031 exchange rules? Put simply, if a property is rental property this year only, will the 1031 exchange apply? One typical safe answer is the “longer the better”. However, that is not much help.

Another answer is that the taxpayer must have actually intended to hold the relinquished property for investment/business purposes (when it was disposed of) in order to qualify. Many tax professionals think that a year of qualified use for investment/business purposes is sufficient. I have always felt better with two years because of an old PLR that said two years was sufficient.

Curious About Section 1031?

If you want to learn more about section 1031 of the Internal Revenue Code and how it can help you save on taxes when selling investment real estate, reach out to CPEC1031 today! Our qualified intermediaries have more than two decades of experience facilitating real estate exchanges of all shapes and sizes. We can prepare all of your 1031 documents and ensure that you fully understand the 1031 exchange process. Contact us today to learn more about our full range of 1031 exchange services. You can find us at our main office in downtown Minneapolis.

  • 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

What to Know About Perpetual Easements & 1031 Exchanges

Many people are doing 1031 exchanges of real estate. A subsection of real estate would be the granting of a perpetual easement, such as a conservation easement. Significant interests like a perpetual transfer of rights in your property that restrict your ability to use it and to fully exploit every aspect of it – those interests can be 1031 exchanged. More importantly, these interests can be exchanged into a fee title interest in other real estate.

For example, a farmer who is granting a 30-year encumbrance such as a conservation easement or watershed restriction may be able to 1031 exchange that interest into other property that is like-kind (i.e. real estate that’s in the United States that’s going to be held for investment or business purposes).

So not only can fee title be exchanged, lesser interests can also be exchanged. This is an important tax planning opportunity for anyone considering granting a conservation easement or a similar kind of restriction that affects their property either perpetually or for a period of 30 years or more.

  • 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

Defer the tax. MAXIMIZE your gain.

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