Finding the Right Balance in Your 1031 Exchange

Like many types of real estate transactions, a 1031 exchange is a delicate balancing act. If even one element is off kilter it can throw the entire like-kind exchange out of whack. In this article, we offer some tips for finding the right balance in your 1031 exchange.

Be Mindful of Your Equity, Value & Debt

It’s important to remember that there are three specific categories in which your 1031 exchange needs to be balanced: equity, value, and debt. When you’re searching for a replacement property, it’s important to make sure that it is equal to or greater than your relinquished property in these three categories (equity, value, and debt). If your replacement property is out of balance with your relinquished property in these categories, it can throw your exchange off and you may not be able to defer all of your capital gains tax burden. A qualified intermediary can help you better understand your situation and make sure that your real estate exchange is well balanced.

Find Out if Your Property Qualifies for 1031 Treatment

Find out if your property qualifies for 1031 exchange treatment by speaking with a qualified intermediary today. At CPEC1031, LLC our qualified intermediaries have more than twenty years of experience facilitating 1031 exchanges of all sorts. We can help you navigate the like-kind exchange process and ensure your transaction meets all the necessary criteria for 100% tax deferral. Reach out to our team of 1031 exchange professionals today to discuss the details of your next like-kind exchange of real estate.

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

2024 Democratic Platform Calls for the Repeal of Section 1031 – Why That’s a Bad Idea

The Democratic Party recently released their 2024 Platform. In it, they call for the repeal of section 1031. Here is an excerpt from page 16 of the Platform document:

• “We’ll also eliminate the so-called ‘like-kind exchange’ loophole that allows wealthy real estate investors to avoid paying taxes on real estate profits, as long as they keep investing in real estate – a tax break that Trump protected for himself and other corporate landlords in his 2017 tax scam. No other industry has that kind of sweetheart deal; it ends now.”

In this article, we are going to explain why repealing section 1031 of the Internal Revenue Code is a bad idea for individual taxpayers and the economy as a whole.

1031 Exchanges Benefit a Wide Range of Taxpayers

1031 exchanges are not just for wealthy investors as some in Washington seem to believe. In fact, most of our clients are small mom & pop shops – families who own duplexes, retail shops, farms, etc. These taxpayers often depend on the tax-saving benefits of Section 1031 to grow and expand their businesses.

1031 Exchanges Benefit the Economy

1031 exchanges are good for the overall health of the economy too. Like-kind exchanges create jobs (in construction, real estate, and other adjacent industries), incentivize investment, and keep capital moving around in the US economy.

Section 1031 encourages the development of workforce housing, private infostructure like warehouses and distribution centers, and allows for the re-imagining of underutilized real properties. If Section 1031 did not exist, owners of investment real estate would be much less motivated to continue investing in real estate. It’s much more likely that they would simply decide not to sell in order to avoid a capital gains tax hit. This is called the “lock-in effect” when owners can’t sell without the double hit of recognition of the taxes and repayment of their mortgages…after which they might not have much to keep from the sale.

Take Action to Save Section 1031

Click on this link to learn more about the many benefits of section 1031 and take action to preserve section 1031 by contacting your member of congress:

https://1031buildsamerica.org/

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

Key Considerations for 1031 Exchanges

When delving into a 1031 exchange, there are crucial factors to keep in mind to ensure a smooth transaction. Here are some key points to be vigilant about.

Exchange Fees

In a standard "forward type" exchange, expect exchange fees of approximately $950 for the relinquished property closing and $350 for the replacement property closing. These fees will be deducted from the proceeds at the time of closing, so clients won't have to pay out of pocket.

Commissions and Closing Costs

Qualified exchange expenses like broker's commissions, title insurance fees, escrow fees, appraisal fees, transfer taxes, and professional service fees can generally all be paid from the exchange proceeds without impacting the exchange's qualification.

Additional Considerations

• Selling to a related party requires careful consideration.

• Lending money to the buyer of the relinquished property can impact the exchange.

• Ensuring that the value of the replacement property equals or exceeds the amount realized from the relinquished property is crucial if you want to defer 100% of the gains.

By staying aware of these factors and working closely with a qualified intermediary, you can navigate a 1031 exchange successfully. Your feedback and questions are always welcome to ensure a seamless process.

Like-Kind Exchanges Can Save You Money in Capital Gains Taxes

The biggest benefit of conducting a like-kind exchange is that you are able to defer capital gains taxes on the sale of investment real estate. However, in order to get that tax-deferral you need to meet certain benchmarks and timelines. A qualified intermediary is your go-to resource for all things 1031 exchange. Having an intermediary on your team will help solidify the success of your 1031 exchange transaction. Contact CPEC1031, LLC today for help with your next like-kind exchange of real estate.

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

When to Consider a Build-to-Suit 1031 Exchange

There are numerous types of 1031 exchanges that you can use to defer capital gains taxes on the sale of investment real estate. For some taxpayers, it can be difficult to determine which type of exchange best suits their needs. In this article, we are going to talk about when to consider a build-to-suit 1031 exchange of real estate.

Build-to-Suit Exchanges

A build-to-suit exchange has the same ultimate outcome as any other type of exchange – capital gains tax deferral. However, this type of exchange is a bit more complicated than a typical forward exchange. With a build-to-suit exchange, you perform construction improvements on your property as part of the exchange itself. This is a great option for those who can’t find a replacement property that perfectly matches their needs.

Bear in mind that any improvements made to the property as part of the exchange need to be completed within the 180 day time frame that governs all exchanges. It’s important to bear this deadline in mind and do as much prep work as possible before starting your exchange.

Turn Your 1031 Exchange Dream into a Reality

Contact CPEC1031, LLC today to turn your 1031 exchange dream into a reality! Section 1031 of the IRC is available for all US taxpayers to use. With the power of section 1031, you can defer your capital gains tax burden when selling real estate that qualifies for 1031 exchange treatment. The qualified intermediaries at CPEC1031, LLC have over two decades of experience helping taxpayers just like you defer their capital gains taxes. Let us put our experience to work and help ensure your 1031 exchange is successful.

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

How to Take Advantage of the Tax-Saving Benefits of Section 1031

There are a wide range of benefits that come with conducting a 1031 exchange, but many people don’t know how to get the ball rolling. In this article, we are going to talk about how to take advantage of the tax-saving benefits of section 1031 of the Internal Revenue Code.

Deferring Taxes on the Sale of Qualifying Real Property

First, let’s talk about the fundamentals of section 1031. A like-kind exchange (also known as a 1031 exchange) is an alternative to an outright sale of property in which you exchange your current property for a replacement property. This allows you to defer your capital gains tax burden on the sale, but you must move all of your sales proceeds into a new replacement property rather than pocketing those funds.

This can result in potentially massive tax savings as you keep your money working for you in a continued investment.

A Qualified Intermediary Can Help

A qualified intermediary is your ticket to a successful 1031 exchange. They act as the neutral third party during the transaction and hold your funds to make sure you never receive any cash boot during the transaction. They can also answer your questions and prepare the appropriate documentation for the transaction.

Take Advantage of the Tax-Saving Benefits of a Like-Kind Exchange

If you’re selling investment real estate, take advantage of the tax-saving benefits section 1031 of the IRC and exchange your property in a 1031 exchange! There are many benefits of conducting a 1031 exchange of real estate – chief among them is capital gains tax deferral. A qualified intermediary at CPEC1031, LLC can help you make sense of the many rules and requirements of section 1031 and make sure you are set up to execute a fully deferred 1031 exchange of your real estate.

• 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved