What Exactly is a Simultaneous 1031 Exchange?

1031 exchanges come in a variety of types. One such type, perhaps the most common, is the simultaneous 1031 exchange. In this article, we are going to explain how exactly a simultaneous 1031 exchange works and when you may want to consider one.

How a Simultaneous 1031 Exchange Works

A simultaneous 1031 exchange is a type of like-kind exchange in which the relinquished property is sold and, immediately after, the replacement property is acquired.

The Benefits of a Simultaneous 1031 Exchange

The benefits of a simultaneous 1031 exchange are the same as any type of 1031 exchange – capital gains tax deferral. A successful 1031 exchange can save you a lot of money that would otherwise be paid out in taxes. You can then keep that money building interest in a continued investment, compounding over time.

Realize the Cost-Saving Benefits of a 1031 Exchange

A 1031 exchange can be a vehicle for massive cost-savings as it allows you to defer capital gains taxes when selling qualified investment real estate. Section 1031 of the Internal Revenue Code is a tool that any United States taxpayer can use to defer their capital gains taxes. Reach out to a qualified intermediary at CPEC1031, LLC today to learn more about the like-kind exchange process and see how we can help facilitate your exchange. You can find us in downtown Minneapolis at our primary office. We also serve clients throughout the United States so don’t hesitate to give us a call if you are located in a different state!

• 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 - Dealing with 1250 & 1245 Gains

Let’s say that you’re a farmer. You own a piece of land. On that land is a chicken coop and maybe some other agricultural buildings. What can you do with real property improvements that helps your current tax situation?

You can’t depreciate land or dirt, but real property improvements can be depreciated so you can accelerate the depreciation on components that you own. You can use those accelerated deductions to offset your gains in other areas. If you’re a real estate professional, you might have almost unfettered ability to take those paper losses and use them against your other income.

Now when you go to sell your real estate, you really have two buckets of gain. You’ve got the land, and the long-lived improvements that are either depreciable (like dirt) or 39 years straight line (e.g. for a commercial building). But those components that can be rapidly depreciated are in a different bucket of gain called the “1245 gain.”

1245 trumps 1031. If you don’t offset and match up your 1245 gains with new 1245 real property components, you’re not going to be able to fully defer your gain. So if you’re going from a small agricultural hog building operation to a large hog building, you might be OK because you can match up your 1245 components with new 1245 property. Your gains can basically be moved over. And it doesn’t have to be identical properties. You don’t have to go from a hog building to a hog building. You just need to go from 1245 component to 1245 component. What that might necessitate though is thinking ahead and conducting a cost-segregation study on your replacement property to see what components are there and to make sure you have sufficient components to offset your 1245 gains.

• 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

1031 Exchanges Involving Purchase Price Allocations

Recently, we had a client come to us with a unique 1031 exchange situation. In this article, we are going to dig into that question and provide an answer.

The Question

Here’s the 1031 exchange question, according to the client:

• “We have a potential buyer for the relinquished property in St. Paul that wants to be able to force a purchase price allocation as part of the purchase agreement. Their concern is the effect the purchase price will have on the assessed value of the property. They want to do an eCRV that shows a substantial amount of the purchase price being allocated to Goodwill and personal property. So my question is, does the allocation provided on the eCRV make a difference for us in what we can claim for the 1031 exchange? Obviously we want to allocate way less to any Goodwill or personal property because we want to maximize the deferral. 

The Answer

The terms of allocation agreed to in an arms length negotiated contract is VERY problematic. The bill of sale for non real estate is evidence of the intent to sell non real property for other separate consideration. If your basis is low on goodwill and personal property = BIG GAINS recognized by seller and smaller 1031 deferral. My suggestion is to bulk up the value of the real property and hold fast.

Start Deferring Capital Gains Taxes

Start deferring capital gains taxes on the sale of investment real estate now with a 1031 exchange! The first step in any 1031 exchange is connecting with a qualified intermediary who can guide you through the process and make sure your property qualifies for 1031 exchange treatment. The experienced qualified intermediaries at CPEC1031 have been doing like-kind exchanges for clients for over two decades. Let us put our experience to work on your next 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

The Best Way to Determine if Your Property Can Be Used in a Like-Kind Exchange

The first step in any like-kind exchange is figuring out if you can even do one with the property in question. To that end, you need to determine whether your property qualifies for 1031 treatment. In this article, we are going to talk about the best way to determine if your property can be used in a like-kind exchange.

Is Your Property Held for a Qualifying Purpose?

The most important question you need to ask yourself prior to conducting a 1031 exchange is this: “is my property held for a qualifying purpose?”

Any and all property involved in a like-kind exchange must be held for a qualifying purpose. So what exactly is “qualifying purpose” in the realm of 1031 exchanges? In the simplest terms, your real property qualifies for like-kind exchange treatment if it is held for investment purposes, or for use in your trade or business. That immediately excludes property held primarily for personal use (e.g. your primary home).

Reach Out to CPEC1031, LLC to Start Your Exchange

A 1031 exchange may benefit you if you are looking to sell investment real estate but wish to avoid of potentially large capital gains tax bill. Reach out to the qualified intermediaries at CPEC1031, LLC today to start your exchange of real property. Our primary office is located in downtown Minneapolis, but our service area extends throughout the state of Minnesota and across the country. No matter where your property is in the United States, we can help you defer your capital gains with a 1031 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

Video - New & Exciting 1031 Exchange Strategies & Techniques Webinar

We recently held a virtual and in-person workshop called New & Exciting 1031 Exchange Strategies & Techniques. For those who missed the presentation, or for those who were in attendance but wish to revisit, here’s the full recording of the presentation.

Level up your tax knowledge to maximize the potential of your real estate investments. Join top experts for this live in-person advanced workshop with online live streaming to learn advanced strategies and 1031 exchange techniques.

• 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