In the state of Minnesota, we’re very fortunate in that the state pretty much conforms exactly with the federal standard. So if you defer your gain for federal tax purposes you also defer your gain at the state level.
Other states differ from the federal standard. For example, Pennsylvania does not recognize non-simultaneous 1031 exchanges. And if you do a sale of property in Pennsylvania, though you may defer the gain at the federal level you do not get the same deferral at the state level.
The thing about states is that they can differ from the federal standard and they can be more aggressive than the feds in searching out to make sure that they get paid the amount of tax that they’re due.
California 1031 Exchanges
In California for example if you sell a relinquished property there, each year after you have to file a tax return with the state of California to let them know if you’ve subsequently sold your replacement property, because when and if you ever do recognize the gain on the sale of your replacement property they want to collect their state tax at that time when you finally do recognize the gain. If you have questions about state taxation give us a call so that we can talk through the specifics of your situation.
1031 Qualified Intermediaries
For any other questions regarding the 1031 exchange process, contact the qualified intermediaries at CPEC1031, LLC. With twenty years of experience, we can confidently walk you through the 1031 exchange process and answer all of your questions. Contact us today to learn more about our services. Our main office is located in downtown Minneapolis, but we provide services to clients throughout the country.