Video – What If My Replacement Property Costs Less Than My Relinquished Property?

If your 1031 exchange relinquished property closed for $1 million, in total all your replacement properties should be at least $1 million if you want to defer all of your capital gains taxes. If your replacement property is worth $900K, you’re going to recognize gains on that $100,000 buy down in value. In this scenario, you could purchase one replacement property for $900K, and a second replacement property for $110K. Between the two of those properties, you have a greater value than your relinquished property and would be able to defer your capital gains taxes in a 1031 exchange.

This is where a DST can be used as a sort of “gap filler” because you can tailor that purchase to fit your needs. If it’s a leveraged DST, you’re not paying a dollar for every dollar of value – you’re getting some credit for the underlying debt. As a result, you may be paying out less than you would pay out in taxes on the boot if you were to buy down. If you buy an 85% leveraged DST, that’s only going to cost you 15 cents on the dollar to make up that gap. But the effective taxes on a $100K buy down might be almost 50%. What would you rather do – give 50 cents on the dollar to the state of Minnesota and federal government, or instead give 15 cents on the dollar to your stock broker who is going to put that money in a security that might be worth something some day? The money that you pay out in taxes will never come back to you. The money that you give to your stock broker to put in a DST probably will.

CPEC1031, LLC – An Experienced 1031 Exchange Company

CPEC1031, LLC is an experienced 1031 exchange company with decades of time working in the 1031 exchange industry. Our team facilitated like-kind exchange transactions in Minnesota where we are based, and across the entire United States. No matter where your 1031 property is located, we can assist you in deferring your capital gains taxes. Reach out to our team of 1031 exchange professionals today to see how we can help you through the many details of your next 1031 exchange. We are located in the heart of 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 – The Basics of a 1031 Exchange

In the Internal Revenue Code, there is a provision called section 1031. This code section says that if you structure your transaction not as a taxable sale, but as a swap, you can dispose of your appreciated real estate you’ve held for investment or business purposes and exchange it for other like-kind property that’s also going to be held for investment or business purposes.

There are two parts to this litmus test:

1. You must exchange into “like-kind” property. The definition of like-kind in the realm of section 1031 is very broadly construed. Pretty much any real estate in the United States is considered like-kind. An exception to that would be shorter term leases. If you have an airport hangar, it’s probably on a 10-year ground lease. In order for a leasehold estate to be considered like-kind you need to have at least 30 years remaining on that lease, including unexercised options for renewal.

2. Both the relinquished property and the replacement property have to be held for a qualified purpose. In the world of 1031 exchanges, qualified purpose means that your intent must be to hold the property for investment or for use in your trade or business.

Find a Qualified Intermediary for Your Next 1031 Exchange

Reach out to CPEC1031, LLC today to find a qualified intermediary for your next 1031 exchange of investment or business real estate. We have more than two decades worth of experience under our belts. During that time, we’ve worked on all types of 1031 exchanges (forward, reverse, build-to-suit, etc.) and can work with you through the entire process. Contact us today to learn more about the tax-deferral benefits of a 1031 exchange of real estate and see how we can help. You can find us at our Twin Cities office in 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 – Triple Net Lease: A DST Alternative

DSTs – syndicated properties that can only be sold to accredited investors as securities – are very popular right now. While DSTs can be great, they’re difficult for some investors to exchange into and can’t be utilized by everyone.

An alternative to the DST is the Triple Net Lease. I had a client back in the 1990s who would buy Arby’s locations on a triple net basis when nobody wanted to buy them. He had transitioned from management intensive apartments in South Minneapolis to triple net leased Arby’s locations. Eventually he sold those and 1031 exchanged into gas stations in Iowa.

The point is that there are alternatives to the securitized products offered by financial services firms. They are not identical in risk, however. With a triple net lease deal, you have a lot of eggs in one basket. If your tenant decides not to do what they’re supposed to do, then the value of the property will likely decline. You need to look at the value of the property in case it ever needs to be repurposed.

Defer Your Taxes with a 1031 Exchange of Investment Real Estate

Defer your capital gains tax burden by conducting a 1031 exchange of your investment real estate. As long as your property is held for investment purposes or for use in your trade or business, you are eligible for 1031 exchange treatment. Doing a 1031 exchange instead of a straight forward sale means that you get to defer the capital gains taxes on the sale and reinvest those proceeds into a bigger, better replacement property that will continue to compound over time. Reach out to CPEC1031, LLC today to learn more about the like-kind exchange process and see if you are a good candidate.

• 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 of the Road

There are several basic rules of the road when it comes to 1031 exchanges.

• It’s important to remember that partnership interests cannot be exchanged under section 1031 (generally speaking).

• Many people want to cash out and take money off the table in a 1031 exchange. That triggers taxable boot and will invalidate the exchange.

• And then there’s the issue of qualified use in a 1031 exchange. 

Let’s imagine that you exchange your south Minneapolis apartment building and buy an oceanfront condo in Sarasota, FL. You then plan to rent out that property for a number of years. Your initial intent is to hold that property for investment or business purposes (even though your long-term intent may not be clear). How long should you wait before converting that property to personal use? The safest answer is the longer the better.

We have had clients who have moved into their replacement properties and subsequently been audited so this is something you need to be aware of as a possibility.

There are IRS authorities (private letter rulings) that seem to indicate that two years is the standard minimum period of time that you should hold a replacement property before converting to personal use. To be extra careful, it’s a good idea to go longer than that two year minimum if possible.

Consider This Hypothetical:

You move into your Sarasota oceanfront property and then a better property becomes available a few years later. You want to sell that Sarasota property as your principal residence and purchase the new property. There’s another code section (121) that deals with the proceeds from the sale of one’s personal residence. Can you take the full 121 exclusion ($500K if you’re married, $250K if you’re single) on a property that you 1031 exchanged into? You used to be able to do this, but the rules have changed. Now you only get a fraction of the exclusion amount based on the ratio of time you rented the property out and the time you occupied it as your home. Let’s say you rented the property out for two years and then occupied it for another three years. In that situation, you would only get three-fifths of the 121 exclusion. The other thing to be aware of is that you can’t do a 1031 exchange and then do a principal residence exclusion until you wait five years. Once you 1031 into the property you have to wait five years before you take a principal residence exclusion on that particular property. Additionally, the principal residence exclusion does not exclude gain from the recapture of depreciation.

Rather than selling your principal residence and not getting the full exclusion and having to recoup the depreciation, you could elect to continue deferring your capital gains taxes in a 1031 until you die. When you die, your heirs will receive your property with a stepped up basis to the fair market value at the time.

1031 Exchange Company in Minneapolis, MN

CPEC1031, LLC works with real estate investors across the United States on 1031 exchange transactions that help defer capital gains taxes. With more than two decades in the 1031 exchange industry, our qualified intermediaries have the detailed knowledge necessary to ensure your exchange satisfies all the requirements of section 1031 of the Internal Revenue Code. Get the help you need on your next 1031 transaction by contacting our team. You can find us at our primary office located in downtown Minneapolis. Note that we work with clients who own property all over the country.

• 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 Not Considered Like-Kind in a 1031 Exchange?

When you’re thinking about doing a 1031 exchange, there are two parts to the initial litmus test that you must satisfy:

1. The exchange must be for like-kind property.

2. The property involved must be held for a qualifying purpose.

Like-kind generally is very broad. Real estate is generally considered like-kind to other real estate. You can exchange the Empire State Building for a condominium in Naples, FL.

But what are some situations in which real estate may not be considered like-kind?

• Leasehold estates of less than 30 years are not considered like-kind in the realm of 1031. This comes up when dealing with hangars at municipal airports, which are typically on 10 year leases.

• Additionally, certain oil and gas rights are like-kind and some are not. You might need to hire a tax attorney to give you an opinion on whether your specific oil and gas interests qualify for 1031.

Work with a Qualified Intermediary on Your Next Like-Kind Exchange

Work with a qualified intermediary from CPEC1031, LLC on your next like-kind exchange of investment real property. Our team has been facilitating 1031 exchanges across the United States for decades. We can help you with your forward exchange, reverse exchange, or build-to-suit construction exchange. Reach out to us today at our Twin Cities office (located in downtown Minneapolis) to learn more about the tax saving power of section 1031 and see if your property qualifies. Our intermediaries are standing by to discuss your situation.

• 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