Video – The Drop and Swap Option When a Partnership or LLC is Involved in a 1031 Exchange

When selling property owned by an LLC or partnership, you have a couple of options. One such option is the “drop and swap” in which you take all the former partners and redeem them out of the partnership with a liquidating distribution by giving them a deed to their proportionate share of the underlying real estate. Then when the sale takes place, you’ll have multiple co-sellers, each selling their own fractional interest in the real estate. Each co-seller can take their proportionate share of the proceeds and potentially do a 1031 exchange or take the money and pay the taxes. The important thing is that they’re not conjoined under the banner of an entity any longer because you’ve distributed the real estate out of the entity.

Find a Qualified Intermediary Near You

Contact a qualified intermediary near you to start your 1031 exchange today and start deferring capital gains taxes when selling investment real estate. Section 1031 is a powerful provision that’s been built into the tax code. Any US taxpayer can use it to defer capital gains taxes on the sale of investment or business real estate. Reach out to a qualified intermediary at CPEC1031, LLC today to learn more about the 1031 exchange process and get started with your next exchange. You can find us at our Twin Cities office located 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Video – 1031 Exchange Rules for Identification of Real Property

When you identify your replacement property in a 1031 exchange, you have three basic options:

  • You can use the three property rule that allows you to identify any three (or fewer) properties, regardless of their value. For example, you could identify the Sears Tower in Chicago, the IDS Tower in Minneapolis, and the Mall of America in Bloomington. Those are three distinct properties.

  • You can use the 200% rule, which allows you to list any number of properties in your identification. However, the value of all those identified properties cannot exceed twice the value of what you relinquished. Let’s say your relinquished property sold for $10 million. Under this rule, you could identify properties worth a total of up to $20 million. The problem with the 200% rule is that value is subjective. If you want to list the Foshay Tower in Minneapolis as a replacement property, how do you know how much it’s worth if you don’t have a contract price negotiated?

  • You can use the 95% rule. Under this rule you can list more than three properties and more than 200% in value, but you must purchase and actually receive 95% of all those identified properties.

Anything that you purchase and receive within the 45 day period will be considered identified by virtue of you having closed on it. So you don’t need to make a written identification if you’ve closed on the property within that 45 day period.

Don’t Miss Out on Capital Gains Tax Savings – Consider a 1031 Exchange!

If you’re selling investment real estate, don’t miss out on the capital gains tax savings offered by a 1031 exchange! Anyone can do a 1031 exchange so long as they hold qualifying real property. Work with a 1031 intermediary at CPEC1031, LLC to acquaint yourself with the like-kind exchange process and see if your property is a good candidate for 1031 treatment. We have over two decades of experience in the 1031 exchange industry and can help you defer your capital gains taxes in a like-kind exchange transaction. Contact us today at our Twin Cities office 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 – What is the Same Taxpayer Requirement in a 1031 Exchange?

LLCs can be complicated to navigate when considering a 1031 exchange. You have to consider both HOW you hold title and WHERE you hold title.

An LLC can be like a chameleon. They can be treated as corporations, partnerships, sole proprietorships or single-member disregarded entities. Then there’s an unusual geographic disparity that happens when you have community property states (like Wisconsin, Texas, or California) where a husband and wife that file a joint tax return can be considered a single-member for federal tax purposes. An LLC owned by a husband and wife in a community property state can be considered a disregarded entity. In equitable title states (such as Minnesota), a husband and wife in an LLC together would have to file a 1065 and treat the entity as if it were a partnership (or elect corporate treatment).

Talk to a Qualified Intermediary About Your 1031 Exchange

Talk to a qualified intermediary about your next 1031 exchange of real estate and start deferring your capital gains taxes! Section 1031 is a powerful tool that any US taxpayer can use to build wealth over time in continued investment property. Make sure you have all your bases covered by working with a qualified intermediary on your next 1031 exchange. CPEC1031, LLC has been facilitating exchanges under section 1031 of the IRC for decades. Let us handle the details of your next like-kind exchange so you can rest easy throughout the entire process.

  • 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 – 708 Spin-Off: When a Partnership is Involved in a 1031 Exchange

When a partnership is involved in a 1031 exchange, one way to do the deal is a 708 spin-off. That’s where the original LLC divides like a cel in a petri dish and multiple new iterations of that LLC are produced.

Each of those new LLCs (or subsidiaries) are considered for tax purposes to be spun-off continuations of the original entity. You can then choose to weight the ownership of the new LLCs so they’re mostly on one particular taxpayer. For example, one of the spun-off subsidiaries might be 98% owned by Jim and 2% by the other owners (and vice versa) so each LLC has a 98% owner and a 2% owner. The idea is to divide the LLC under the partnership division rules so that each LLC can do a sale of its proportionate share of the underlying real estate. It’s sort of like a hybrid version of the crude drop and swap, but we don’t have to worry about the holding period as much because each spun-off subsidiary is a continuation of the predecessor. So a 708 spin-off is a great way to have a more airtight, defensible break up when you’re trying to divide up a property that’s been held in a partnership entity.

Contact the Team at CPEC1031, LLC

Thinking about a 1031 exchange of real estate? Contact the team at CPEC1031, LLC today to learn more about how to begin the process of deferring your capital gains taxes when selling investment real estate. With more than two decades of experience, our qualified intermediaries are well suited to help you through the details of your 1031 exchange, regardless of its complexity. Whether you are doing a forward exchange, a reverse exchange, or a construction exchange, we can help you defer money in capital gains taxes. Reach out to our team of intermediaries today for help with 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Video – Understanding 1031 Exchange Tax Forms

In a 1031 exchange transaction, the title agent is the party responsible for reporting the sale to the IRS on form 1099-S. That’s an electronic tax filing that goes directly to the IRS. All title companies, escrow companies, closing agents, or whomever is closing on your sale must do a 1099-S to report the grantor that’s conveying the property and how many gross proceeds they’re receiving.

So the IRS will be informed of the property sale. Then it’s the taxpayer’s job to do a 1031 exchange and report the completion of the exchange on IRS form 8824 so they can see how the pieces of the puzzle fit together – the sale of the relinquished property and the purchase of the replacement property.

Capital Gains Tax Deferral via 1031 Exchange

A 1031 exchange can help you defer capital gains taxes on the sale of your investment or business real estate. This is a powerful tool that can be utilized by any United States taxpayer who owns qualifying real estate. Contact the qualified intermediaries at CPEC1031, LLC today to learn more about the benefits of section 1031 and see how we can help you defer capital gains taxes on the sale of investment real estate. You can reach out to us at our Twin Cities office today to see if your property qualifies for 1031 exchange treatment.

  • 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.

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