Is it Possible to Take Cash Out if Part of the 1031 Exchange Property is Homesteaded?

Recently, we were asked the following question:

  • In a 1031 exchange, is it possible to take care out if a portion of the 1031 exchange property is homesteaded?

That’s our topic for today’s article – 1031 exchanges involving property that is part owner-occupied and part business.

Partial 1031 Exchanges

If the relinquished property is part owner-occupied and part business or rental (for example, a duplex that is half rented and half owned-occupied), then the IRC Section 121 principal residence exclusion may apply to the owner-occupied proceeds if you have owned the property and lived in it for at least two out of the proceeding five years.

Additionally, IRC section 1031 may allow for the deferral of gains on the portion of the proceeds that relate to the business or rental part of the property. You can’t buy for a transaction and use both of these preferential tax provisions.

CPEC1031, LLC – Like-Kind Exchange Company

CPEC1031, LLC offers like-kind exchange services to taxpayers throughout the entire United States. Regardless of where your investment property is located in the US, we can help facilitate your exchange under section 1031 of the Internal Revenue Code. Many taxpayers have availed themselves of the tax saving benefits of the 1031 exchange and you can too! Contact our qualified intermediaries today to learn more about the various benefits of like-kind exchanges, whether you are a good candidate for 1031, and how we can help.

  • 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

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Video – Consolidating LLCs or Partnerships Prior to a 1031 Exchange

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In a 1031 exchange, the general rule is you can’t exchange into that which you already own because that wouldn’t be an “exchange.” But what if you’re in a partnership or LLC and you want to buy out all of the other partners, and you want to use your 1031 exchange funds for that purchase and consolidate 100% of the ownership in your sole name?

Revenue Rule 96-6 is your friend in this scenario. It tells us that when you consolidate 100% of a partnership and make it into a disregarded entity that you’re basically deemed to have acquired the real estate of the exiting partners. This is a great planning tool to consolidate partnerships and take control of the project for yourself.

Defer Capital Gains Taxes with a 1031 Exchange

Defer your capital gains tax bill when selling investment real estate by conducting a 1031 exchange rather than a straightforward sale. CPEC1031, LLC has been working on 1031 exchanges for decades. We can help you through the entire 1031 exchange process – from the sale of your relinquished property to the identification and acquisition of your replacement property. Contact us today to learn more about the many benefits of section 1031 and see how you can save money on capital gains taxes when you sell 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

 

Video – DSTs and 1031 Exchange Property Identification Rules

When you’re doing a 1031 exchange, you need to identify your replacement property within the first 45 days after the date of the relinquished property closing. Most people use the simplest rule (the 3 property rule). However, if you’re going to be identifying a DST (Delaware Statutory Trust), you should be mindful that the trust may be a portfolio of multiple properties. By identifying it you may reach the 3 property rule because its components exceed 3 properties.

Some people use the open third slot on their identification form as an insurance policy – trying to identify property as a fallback just in case the first two options don’t work out. By sliding a DST into that slot, you could blow the 3 property rule if that newly added DST is comprised of multiple assets.

There’s an easy workaround for this. Instead of using the 3 property rule you could use the 200% rule. However, in that case, you need to make sure that the value of all your identified properties doesn’t exceed twice the value of what you sold.

Work with a 1031 Exchange Professional

You can avoid any potential pitfalls like the one described above by working with a 1031 exchange professional at CPEC1031, LLC. Our qualified intermediaries are here to help you with all your like-kind exchange issues. Let us help set your exchange up for success. Contact us today at our Minneapolis office to learn more about our services and get started 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

 

1031 Exchange Strategies for 100% Tax Deferral

The ultimate goal of most 1031 exchanges is 100% capital gains tax deferral on the sale of qualifying property. Unfortunately, due to a variety of potential pitfalls, sometimes taxpayers are only able to defer part of their gain. In this article, we are going to talk about a few strategies you can employ to help ensure 100% tax deferral during your 1031 exchange.

Keep an Eye on Your Value, Equity & Debt

In a 1031 exchange, you ideally want to exchange into a replacement property that’s bigger and better than your relinquished property. To that end, it’s important to keep an eye on your value, equity, and debt when looking for a replacement property. If you want to defer 100% of your gains, make sure your replacement property is equal to or greater than your relinquished property in all three of these categories (value, equity, and debt).

Don’t Miss Your Deadlines

The 180 day exchange period is a strict time frame. If you do not complete your 1031 exchange within this time period, your exchange will fail and you won’t be able to defer any of your gains. It’s important to plan ahead and work with a qualified intermediary who can help set you up for success.

Contact a Minnesota Like-Kind Exchange Company

Contact Minnesota like-kind exchange company, CPEC1031, LLC today for help with your next 1031 exchange of real property. Our qualified intermediaries have decades of experience working with taxpayers on all types of 1031 exchanges. You can find us at our primary office in downtown Minneapolis. We work with clients throughout the entire state of Minnesota, as well as the United States at large. No matter where your transaction is taking place, we can help you defer capital gains taxes. Give us a call 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

 

Video – How Financial Planners can Talk to Their Clients About the Benefits of 1031 Exchanges

Many clients own physical investment real estate and they no longer want to deal with the troubles associated with that real estate (tenants, toilets, etc.) Financial planners that have Delaware Statutory Trusts (DSTs) that morph into an UPREIT are able to help their clients transition from management-intensive physical real estate into passive, management-free real estate that provides a tax-efficient but still institutional grade quality investment.

If you want help highlighting the benefits of 1031 exchanges to your clients, feel free to reach out to CPEC1031, LLC.

1031 Exchanges in Minneapolis, MN

CPEC1031, LLC is located in Minneapolis, but we work with clients on 1031 exchanges of real estate all across the United States. If you are thinking about starting a like-kind exchange with your property, the qualified intermediaries at CPEC1031 are your go-to resource. We can help you identify your replacement property, prepare all of your documentation for closing, and ultimately defer your capital gains taxes on the sale of your investment real estate. Reach out today to learn more about the exchange process and see how our team can help.

  • 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Defer the tax. MAXIMIZE your gain.