Tips for Getting the Most Out of Your 1031 Exchange

When conducting a 1031 exchange, most taxpayers want to do everything possible to get the most out of the transaction. But there are several potential pitfalls that can lead to a less than ideal 1031 exchange. In this article, we offer up a few tips for getting the most out of your 1031 exchange of real estate.

Think About Your Debt, Value & Equity

In most 1031 exchanges of real estate, taxpayers are hoping to defer 100% of their capital gains tax burden. However, in order to defer 100% of your taxable gain, you need to meet certain thresholds. Specifically, you need to make sure your replacement property is equal to or greater than your relinquished property when it comes to value, equity, and debt. If you fail to meet these benchmarks you may still be able to do a partial 1031 exchange, but it won’t be 100% tax-deferred.

Consider a Build-to-Suit Exchange

You can also consider a build-to-suit exchange if you want to add any construction improvements to your replacement property before completing the transaction. But keep in mind that any improvements you make to the replacement property must be completed within the 180 day exchange timeframe.

Take the First Step Towards Capital Gains Tax Deferral

Take the first step towards capital gains tax deferral today by reaching out to a qualified intermediary at CPEC1031, LLC to discuss your 1031 exchange. Our intermediaries have decades of experience under their belts. We can assist you through all the steps in a 1031 exchange and help you avoid any potential entanglements. Contact us today at our Minneapolis office to learn more about us, the 1031 exchange process, and how you can save money in capital gains taxes by conducting a like-kind exchange of qualifying 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

Why Take the 1031 Exchange Leap?

Many taxpayers are curious about 1031 exchanges but might be hesitant to take the leap into tax deferral. In this article, we are going to talk about a few reasons why you might want to take the 1031 exchange leap to defer capital gains taxes.

The Benefits of Capital Gains Tax Deferral

A 1031 exchange has numerous benefits. Perhaps the greatest benefit offered by section 1031 is that it allows you to defer capital gains taxes on the sale of real estate (held for investment or business use) as long as you reinvest the sales proceeds into a like-kind replacement property. This allows you to save a potentially large sum of money in capital gains taxes while keeping your hard-earned money working for you in a continued investment.

Capital gains tax deferral is often reason enough to take the 1031 exchange lap, but there are other benefits as well. With a 1031 exchange, you can move into and out of different segments of the real estate industry. For example, if you own a retail space and want to move into an apartment building, a 1031 exchange allows you to do so in a tax advantageous manner.

1031 Qualified Intermediary Services

CPEC1031, LLC offers qualified intermediary services to US taxpayers who are looking to defer their capital gains taxes on the sale of investment property. Our team of intermediaries can help guide you through the unique details of your 1031 exchange and answer any questions you have along the way. A 1031 exchange is a powerful tax-saving tool, but you need to make sure you are meeting certain benchmarks in order to defer 100% of your capital gains taxes. Let us help ensure your like-kind exchange is a complete success. Contact CPEC1031 today to get started.

  • 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

 

The 15% Exception for Incidental Personal Property in a 1031 Exchange

In the realm of 1031 exchange transactions, oftentimes the real property being acquired may come bundled with minor personal items like furniture, fixtures, and equipment, which are referred to as incidental property.

2 Conditions for Incidental Personal Property

For personal property to be considered incidental to a larger real property item, two conditions must be met:

  • it is typically transferred alongside the larger item in standard commercial transactions, and

  • the total fair market value of all incidental property does not exceed 15% of the larger property's fair market value.

However, incidental property can present challenges in 1031 exchanges. One issue is how to properly identify replacement properties when they include such personal items. Another concern arises when acquiring identified replacement properties that also have incidental property included in the transaction.

The 15% Exception

The 15% exception for incidental personal property applies only to replacement property purchased, not to relinquished property sold in a like-kind exchange. To handle personal property proceeds, it's recommended that the seller retains those funds and assigns rights related to real property to the Qualified Intermediary. A sub-allocation of real property purchase price may also be necessary for tax depreciation considerations.

Get in Touch with a Qualified Intermediary

Jumpstart your 1031 exchange today by getting in touch with a qualified intermediary from CPEC1031, LLC. We have been in the 1031 exchange industry for more than twenty years and can guide your transaction through the 1031 exchange period from start to finish. Let us help you defer your capital gains tax burden when selling investment real estate. You can find us at our Minneapolis office and set up a time to chat with one of our team members. 

  • 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

1031 Exchange Ownership Issues & Homesteading

Many taxpayers have questions about 1031 exchanges involving ownership and homesteading. As a way of approaching this topic, let’s consider a hypothetical example. Imagine you did a 1031 exchange from an office into a residential condominium several years ago and that the asset is owned by an LLC that you control. Are you able to homestead this property if it is owned by an LLC?

Homesteading Depends on How the Property is Held

Generally, properties owned by an entity (corporation, partnership, limited partnership, LLC, LLP, etc.) cannot qualify for a relative homestead. This is a relatively complex arena to navigate. It’s a good idea to talk with your team of advisors – your attorney, CPA, and 1031 qualified intermediary about how to best approach this situation in the most tax-advantageous way possible.

Jump Through the Hoops of the 1031 Exchange Process

At CPEC1031, LLC we work with taxpayers throughout the United States on like-kind exchanges of real estate. With more than two decades of experience at our backs, we are well-equipped to help you through the specific details of your unique real estate exchange. Our qualified intermediaries are ready to assist you through the hoops of the 1031 exchange process and help you attain 100% capital gains tax deferral. Find us at our primary 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.

© 2024 Copyright Jeffrey R. Peterson All Rights Reserved

How to Deal with Incidental Personal Property in a Like-Kind Exchange

How you handle items of personal property can make or break your 1031 exchange. In this article, we are going to offer a few tips for dealing with incidental personal property in a like-kind exchange transaction.

Dealing with the Purchase Price in the Sale Agreement

During the exchange process, proceeds allocated to personal property are generally not exchange-eligible due to not being real estate. It's crucial to allocate the purchase price between real property and personal property in the relinquished property sale agreement. The portion designated to personal property doesn't go through the Qualified Intermediary.

Clear Representation in the Qualified Exchange Agreement

To ensure no proceeds from relinquished personal property are mistakenly deposited with the Qualified Intermediary, it's advised to have a clear representation in the Qualified Exchange Agreement confirming that all deposited proceeds are from the sale of real property under Section 1031. This helps prevent any confusion over the handling of personal property funds in 1031 exchanges.

Find Out if Your Property Qualifies for 1031 Exchange

Contact a qualified intermediary at CPEC1031, LLC to find out if your property qualifies for 1031 exchange tax deferral. Our team has more than two decades of experience working on like-kind exchanges in Minnesota and across the country. We have all the tools necessary to ensure your exchange is successful. Reach out to our qualified intermediaries today to discuss the details of your next 1031 exchange and start realizing the tax-saving benefits of section 1031 of the Internal Revenue Code.

  • 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

Defer the tax. MAXIMIZE your gain.