1031 Exchange Archives - Commercial Partners Title

July 23, 2019 by Jeff Peterson

Deferred 1031 Exchanges Explained

When we speak of a 1031 tax exchange – we are typically talking about a Deferred Exchange.

In a Deferred Exchange a taxpayer conveys (or sells) the old relinquished-property on day zero of the exchange timeline, and then has up to 180 days after that date (or the due date of the taxpayer’s federal income tax return, including extensions, whichever occurs first) to receive the replacement property.

In legal terms, the conveyance must be part of an integrated, interdependent, mutual, and reciprocal-plan, intended to effectuate an exchange by the taxpayer of like-kind property pursuant to the 1031 rule.

To help you understand this process – observe this timeline which demonstrates that both the 45 day time-period and 180 day time-period run concurrently.

1031 Deferred Exchange Timeline

The replacement property must be received within the earlier of:

180 days after the closing of the relinquished-property.

The due-date for your tax return for the taxable year in which the transfer of the relinquished property occurs (including extensions).

Contact a Commercial Title Company

A commercial real estate transaction can be complex and daunting for many. Having a trusted commercial title company by your side throughout the process can help make things go a lot smoother. Give us a call to discuss the specific details of your commercial transaction. Our main office is located in the heart of downtown Minneapolis but we work with clients across the United States. No matter where your property is located, we can help you through the entire commercial real estate transaction.

July 9, 2019 by Jeff Peterson

3 Property Identification Options in a 1031 Exchange

The 1031 proceeds of the sale must be re-invested in a like-kind asset within 180 days of the sale. Restrictions are imposed on the number of properties which can be identified as potential Replacement Properties within the first 45 days after closing. More than one potential replacement property can be identified as long as you satisfy one of these ALTERNATIVE rules:

The Three-Property Rule – Up to three properties regardless of their market values. All identified properties are not required to be purchased to satisfy the exchange; only the amount needed to satisfy the value requirement. [This is the most commonly used rule]
The 200% Rule – Any number of properties as long as the aggregate fair market value of all replacement properties does not exceed 200% of the aggregate Fair Market Value (FMV) of all of the relinquished properties as of the initial transfer date. All identified properties are not required to be purchased to satisfy the exchange; only the amount needed to satisfy the value requirement.
The 95% Exception – Any number of replacement properties if the fair market value of the properties actually received by the end of the exchange period is at least 95% of the aggregate FMV of all the potential replacement properties identified. In other words, 95% (or all) of the properties identified must be purchased or the entire exchange is invalid.

NOTE: The replacement property received must be substantially the same as property identified within the 45-day limit described above.

For more information, please check out this video.

Commercial Partners Title

Commercial Partners Title offers title underwriting and closing services for commercial real estate transactions. We have decades of experience working with taxpayers on commercial transactions large and small. Our focus is on relationships and top-notch customer service. In fact, we are recognized by our peers as experts in the field of commercial title insurance both in Minnesota and across the country! Contact us today to discuss your next transaction and see how we can help. Our main office is located in downtown Minneapolis, but we work with clients throughout the United States.

July 2, 2019 by Jeff Peterson

Failed 1031 Exchange May Qualify for Installment Sale Treatment under IRC Sec. 453

It is possible that a seller (intending to conduct a 1031 exchange, but failing to identify or properly receive replacement property) to be able to defer the income tax consequences from the failed 1031 exchange into the following income tax year. If the deferred exchange where the funds are held by a qualified intermediary fails, the seller should still be entitled to installment sales treatment when the proceeds or nonlike-kind property are received. This can be much better than recognition of the gain in the income tax year in which the relinquished property is closed.

Internal Revenue Code

The provisions of IRC §453 specifically contemplate that the installment sale rules and the like-kind exchange rules of IRC §1031 may apply to the same transaction.

453(f)(6) provides that in the case of an exchange which only partly satisfies the nonrecognition of gain rules under §1031 because of the receipt of boot, the taxpayer’s ability to use installment sale treatment with respect to the boot is determined by excluding from the installment sale computations
any qualifying like-kind property received by the taxpayer and
the gain not recognized as a result of such like-kind property.

Contact Commercial Partners Title

If you’re looking for help with your commercial transaction, you’ve come to the right place. Commercial Partners Title has been facilitating commercial real estate deals for decades. We have the knowledge and experience to ensure that your next commercial transaction is a great success. Contact Commercial Partners Title Company today to get help with your commercial real estate transaction. Our primary office is located in downtown Minneapolis, but we also work with clients across Minnesota and the United States.

June 25, 2019 by Jeff Peterson

Explaining the 1031 Exchange Period

In a 1031 exchange, you have 180 days to complete your exchange. In this article, we are going to discuss the various details associated with the 1031 exchange period.

180 Day Exchange Period

The replacements must be received within the earlier of :

180 days after the closing of the relinquished property; or
the due date for your tax return for the taxable year in which the transfer of the relinquished property occurs, including extensions *.

The 180-Day Exchange Time Period May Not Be 180 Days Long

The replacement property must be received within the earlier of:

180 days after the closing of the relinquished property; or
the due date for your tax return for the taxable year in which the transfer of the relinquished property occurs, including extensions.

Day 0 Day 180 Day 1 180 Day Exchange Period The replacement property must be received within the earlier of:

180 days after the closing of the relinquished property; or
the due date for your tax return for the taxable year in which the transfer of the relinquished property occurs, including extensions.

Federal Return Date

April 15 may not be the taxpayer’s federal tax return filing due date. S corporations and C corporations are due March 15.

Commercial Title Insurance Company

At Commercial Partners Title Company, we are well-equipped to handle all of the details of your next commercial transaction. We have built up a reputation as being the experts in commercial transactions both in Minnesota and across the United States. Our title insurers, underwriters, and escrow agents can take care of all the details of your transaction so you don’t have to worry about them. Reach out to our commercial title experts today for help with your next commercial transaction. You can reach us at our downtown Minneapolis office to set up a time to chat.