Video - Related Party 1031 Exchange Transactions

In a 1031 exchange, a related party is determined in one of two ways. There are people you are in familial relations with (your mother, father, child, ancestral and lineal descendants, etc.) But it’s also people you’re in business with (your employee, agent, attorney, accountant, etc.) These are very complex rules and the net may be broader than you think when determining who is a related party. Since related party transactions are more complicated and sophisticated, it’s important to know who is a related party. It’s a good idea to consult with a tax accountant or attorney if you’re engaged with someone you’ve done business with or that you’re related to by family relation.

• 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

Video - Can a Foreign Person Purchase US Real Property?

Anyone can buy property in the United States, even foreigners. But, subject to certain limitations, when you sell the property, if you’re a foreign person there may be withholdings required where the buyer has to withhold a certain portion of the proceeds because it has to be available to pay the seller’s US property tax liability from the sale. This may complicate a foreign person’s sale of a property but generally speaking, foreign people can buy US real property. It’s just that things get a little bit more complicated when they go to sell the 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

Video - Transactional Expenses that Can be Paid with 1031 Exchange Funds

What transactional expenses can you pay when you’re doing a 1031 exchange? Normally, in a 1031 exchange all of your equity from the sale of the relinquished property go to the intermediary and get reinvested to acquire the like-kind real estate. But you’re going to incur some costs along the way. You’re going to have to pay a real estate agent’s commission on the sale of the relinquished property. You may have to pay state deed tax, transfer fees, recording fees, title company charges, etc. The IRS says in the treasury regulations that you can use a portion of the equity to pay customary transactional expenses. But remember that sometimes non-transactional expenses creep into the closing statement. The property taxes, HOA dues, liability insurance – these are costs of ownership that you’re going to incur whether you sell the property or not. When you put these on the settlement statement that could trigger some recognition of gain. You may be better off bringing some cash to the closing and paying those operational expenses out of pocket. On the purchase of you replacement property, you may be astonished to find out that the costs associated with your new loan, such as origination fees, points, MRT, and other expenses related to the loan are not considered qualified transactional expenses that you can pay without triggering some gain. So you may want to bring some cash to the closing to cover those expenses or even better, negotiate with the lender to give you a no-cost loan where they don’t charge you a bunch of fees, but instead charge you a higher interest rate. Have your accountant go through these statements line-by-line because if you wait until April 15th to show it to your accountant, it will be too late.

• 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 Relinquish Multiple Properties In A 1031 Exchange?

If you are considering a 1031 exchange, you may have a number of questions about the best way to navigate the transaction. One common question that we receive when working with clients who are relatively new to a 1031 exchange is whether or not they can sell multiple properties during an exchange. We explain whether that is allowed, and how to ensure you conduct the exchange properly when relinquishing multiple properties.

Relinquishing Multiple Properties During A 1031 Exchange

While a typical 1031 exchange involves the exchange of a like-kind property for another, oftentimes a client will want to move on from multiple properties at the same time. As long as this exchange follows all of the rules and requirements, it is perfectly acceptable to relinquish multiple properties. You can also acquire multiple replacement properties and relinquish a singular property.

When exchanging multiple properties, there are some considerations that you’ll want to be aware of in order to ensure full tax deferral. You will want to ensure that the replacement property is worth as much or more than the combined value of relinquished properties #1 and #2. You’ll also need to apply all of the cash generated by the relinquishment of the two properties towards the acquisition of the replacement property. And finally, any debt that is resolved upon the transfer of relinquished properties #1 and #2 is replaced with new debt or new cash in the acquisition of the replacement property.

This may sound a bit complex, and to the inexperienced asset manager it certainly can be. Even those with years of experience would benefit from having the entire process streamlined by working with a Qualified Intermediary to ensure any asset exchange is handled correctly and within the Internal Revenue Code. An innocent mistake can prove costly, so put those fears to bed by working with a team that has facilitated countless 1031 exchanges over the past two decades. For help with your 1031 exchange, turn to the team at CPEC 1031. Give our team a call today at (612) 643-1031.

• 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 Buy My Next Property Before Selling Other Property In A 1031 Exchange?

If you are looking to 1031 exchange from one piece of investment real estate and invest in another, you may find it easier to begin the acquisition process before you sell off your relinquished property. This is known as a reverse exchange, and while it is quite common, you need to be aware of how to execute this type of 1031 exchange so that you don’t end up making a costly mistake.

At CPEC1031, we’ve handled countless reverse exchanges and know how to simplify the process so that everything goes smoothly. Below, we explore some of the intricacies of a reverse exchange and discuss some potential pitfalls that you’ll want to avoid.

Understanding Reverse Exchanges

In a nutshell, a reverse exchange occurs when a taxpayer acquires their replacement property before selling their relinquished property.

Even though it’s done in reverse, the exchange must still abide by the 45-day Identification Period and 180-day Exchange Period deadlines of the Internal Revenue Code. Those rules state that, after starting your exchange, you have 45 days to identify in writing all of your replacement properties, and 180 days total to complete the exchange.

Reach Out to CPEC1031, LLC

If you’re looking for an intermediary to help facilitate your reverse exchange, look no further than the team at CPEC1031. These exchanges may seem somewhat straightforward, but missing a deadline can cause major financial headaches, so you need to have an experienced intermediary by your side. To learn more about reverse exchanges, or to connect with a qualified intermediary about an exchange that you are considering or already pursuing, reach out to CPEC1031 today at (612) 643-1031.

• 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