Why It May Not Be a Good Idea to Sell Investment Property that’s Increased in Value

When you’re sitting on an investment property that has skyrocketed in value, selling may be at the top of your mind. But this might not be your best course of action. In this article, we are going to explain why it’s not always a prudent idea to sell an investment property – even when it’s increased in value.

Consider Your Capital Gains Tax Burden

If you’ve owned an investment property for a number of years and it has significantly increased in value it can be quite tempting to sell the property and pocket the net proceeds. This is especially true to seniors who are entering retirement and want to have some additional liquidity. However, what many don’t think about until it’s too late is the tax burden inherent in selling an investment property. The more your property has increased in value, the more capital gains taxes you’re going to have to pay when you sell it.

Consider a 1031 Exchange

A tax-advantageous alternative to selling your property is to exchange it using section 1031 of the Internal Revenue Code. Such an exchange allows you to defer your capital gains tax burden when selling investment property, so long as you reinvest your sales proceeds into a replacement property. This keeps your money working for you in an investment and allows you to avoid a hefty tax burden.

1031 Exchange Intermediaries

If you are struggling with your 1031 exchange, you’ve come to the right place. With two decades of experience in the 1031 exchange industry, CPEC1031 has the skills and expertise needed to ensure your exchange is a success. Whether you’re looking at a forward exchange, a reverse exchange, or a build-to-suit construction exchange, we are here to help. Contact us today at our office in downtown Minneapolis to learn more about our capabilities and to set up a time to chat with one of our skilled 1031 intermediaries.

• 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.

© 2019 Copyright Jeffrey R. Peterson All Rights Reserved

Back Leg & Front Leg Reverse Exchanges

Reverse exchanges are one type of 1031 exchange that are a bit more complicated than the traditional forward exchange. Due to their complexities it’s important to take extra care when dealing with a reverse exchange. In this article, we are going to talk about the details and benefits of back leg and front leg reverse exchanges.

Reverse Exchanges

• In a reverse exchange, the Exchange Accommodation Title holding Company (“ EAT ”) takes title to property and holds it for up to 180 days

• Compared to forward exchanges, reverse exchanges are more costly and complicated

BACK LEG – Parking the Replacement Property

• The exchangor must identify the relinquished properties that will be sold within 45 days.

• This gets the new property into your hands after you have closed on the sale of the Relinquished Property.

FRONT LEG – Parking the Relinquished Property

• Equity in replacement property must exist at the time of purchase equal to the amount of net proceeds that will result from the sale of the relinquished property.

• Deed Tax may be paid twice.

Contact CPEC1031

Contact the qualified intermediaries at CPEC1031 to start saving money on your next sale of commercial real estate. We have over twenty years of experience facilitating the 1031 exchange process for clients across the United States. To start the 1031 exchange process, reach out to our like-kind exchange intermediaries today. You can find us at our offices in downtown Minneapolis. We also work with clients throughout the state of Minnesota and across 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.

© 2019 Copyright Jeffrey R. Peterson All Rights Reserved

Tips for Qualifying Your Vacation Property for 1031 Exchange

Many investors wonder whether or not their vacation property qualifies for 1031 exchange. The answer is – it depends. Vacation property can qualify for 1031 exchange, but there are strict benchmarks you must hit in order for it to qualify. In this article, we are going to offer up some tips for qualifying your vacation property for 1031 exchange treatment.

How to Prepare Your Vacation Property for a 1031 Exchange

If you’ve got a vacation home that you want to convert into a rental property in preparation for an eventual 1031 exchange, here are some tips for doing so:

• Lease the vacation property as much as possible and keep written records of all leasing activities.

• Restrict your personal use of the property to a minimum. The benchmark for 1031 exchange is that the property can only be used personally for less than two weeks per year, or less than 10% of the days that the property is rented.

• List the property on popular rental websites like VRBO.

• Hire a property management company to manage the rental of the property.

• Show rental income and expenses on Schedule E of the property owner’s tax return.

CPEC1031 – Minneapolis, MN

CPEC1031 – based in Minneapolis, MN – is your one stop shop for all things related to 1031 exchanges. With two decades of experience facilitating exchanges across multiple industries, our qualified intermediaries are well-equipped to help you navigate the details of your 1031 exchange. Reach out to our 1031 exchange professionals today to set up your like-kind exchange. Our main office is in downtown Minneapolis, but we work with clients throughout Minnesota, as well as across the United States.

• 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.

© 2019 Copyright Jeffrey R. Peterson All Rights Reserved

What CPAs Should Know About Qualified Opportunity Zones

CPAs are always on the lookout for new tax-saving avenues that they can share with their clients. The new kid on the block is the qualified opportunity zone. In this article, we are going to explain what CPAs should know about qualified opportunity zones.

How Qualified Opportunity Zones Work

Qualified opportunity zones are a recent tax tool that allow investors to defer capital gains taxes when selling property. The catch is that you have to reinvest your capital from the sale into a “qualified opportunity zone” as defined by the governor of the state in which you are investing the funds. The important thing to remember here is that these taxes will come due on December 31, 2026.

1031 Exchange is Often a Better Option

Compared to the new qualified opportunity zones, 1031 exchanges are often a more tax-efficient option. The biggest difference between a qualified opportunity zone and a 1031 exchange is that there is no set date at which all capital gains taxes become due.

With a 1031 exchange you can defer your gains indefinitely by continuing to exchange into bigger and better properties – thus keeping your money hard at work for you as time goes by.

Get Help with Your Real Estate Exchange

If you’re looking for help with your 1031 exchange, you’ve come to the right place! CPEC1031 offers a full range of 1031 exchange services. Our qualified intermediaries can take the reigns of your exchange and ensure that everything goes off without issue. We’ll make sure you are fully prepared for the closing table. Contact us today to set up a time to chat with one of our 1031 exchange professionals about your real estate exchange. You can find us at our offices 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.

© 2019 Copyright Jeffrey R. Peterson All Rights Reserved

Does Your Property Qualify for 1031 Exchange Treatment?

The first thing you need to do when considering a 1031 exchange is to figure out whether or not your property qualifies for 1031 exchange treatment. In this article, we are going to talk about how to determine whether or not your property qualifies for 1031 exchange treatment.

Is it Like-Kind Real Property?

1031 exchanges only apply to like-kind real property. With the implementation of the Tax Cuts and Jobs Act, personal property exchanges are no longer allowed.

Are You Holding it for a Qualifying Purpose?

You also need to hold your property for a qualifying purpose. Specifically, you need to hold your property for investment or business purposes. You cannot exchange property held primarily for personal use. That means your primary residence is excluded from 1031 treatment.

Does Your Property Pass the Napkin Test?

You need to make sure that the property you are exchanging into is greater than your relinquished property in terms of equity, value, and debt (this is called the napkin test).

Save Money on Taxes with a Like-Kind Exchange

A like-kind exchange is your ticket to owing fewer capital gains taxes when you sell investment real estate. At CPEC1031, we have more than two decades of experience facilitating 1031 exchanges of all shapes and sizes. We have the experience needed to ensure the success of your exchange. Contact us today to discuss your 1031 exchange options. We are located in the heart of downtown Minneapolis, and also serve the entire state of Minnesota as well as the entire 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.

© 2019 Copyright Jeffrey R. Peterson All Rights Reserved