There are plenty of ways to create additional revenue streams. One option you might want to consider is to buy and sell investment properties. However, some owners opt for a Starker Loophole or 1031 exchange in Minneapolis, Minnesota instead for a higher profit.
In the real estate industry, a 1031 exchange in Minneapolis, Minnesota involves swapping properties help reduce one’s tax obligations. While this presents a good deal, it’s important to understand the intricacies it entails. If you’re looking into pursuing a 1031 exchange in Minneapolis, Minnesota, here are some salient information you need to know:
The 1031 exchange in Minneapolis, Minnesota is based on a provision under the Internal Revenue Code (IRC). While they’re taxable as sales, your duties can be reduced or deferred. This means you can grow an investment in a 1031 exchange in Minneapolis, Minnesota without worrying about inflated capital gains taxes.
Prior to the revision of IRC’s provision, a 1031 exchange in Minneapolis, Minnesota is only for swapping like-kind properties. You may trade buildings, lands, equipment, franchises, stocks, and other assets held for business or investment purposes.
However, these conditions changed after December 31, 2017. Any 1031 exchange in Minneapolis, Minnesota made following the said date may only involve investment real estate. As long as your trade is of the same or of greater value, a 1031 exchange in Minneapolis, Minnesota will likely push through.
There are three rules you have to remember when identifying properties for a 1031 exchange in Minneapolis, Minnesota. You need to meet at least one of these requirements to qualify for a 1031 exchange in Minneapolis, Minnesota:
You must identify three assets that you’re willing to swap in a 1031 exchange in Minneapolis, Minnesota, regardless of their market value.
This allows you to pick as many properties as you like for a 1031 exchange in Minneapolis, Minnesota. You only need to acquire them for 95% of their original value or more.
This allows you to put an unlimited number of properties as replacements. However, the cumulative value for these estates shouldn’t exceed 200% of the value that they were sold.
If you’re unsure how valuation works, it’s best to seek the help of professionals. They can help you make more informed decisions when you decide to pursue a 1031 exchange in Minneapolis, Minnesota.
Swapping assets doesn’t happen overnight. Each type of 1031 exchange in Minneapolis, Minnesota follows certain timelines and procedures. Some of them include:
These are transactions that take up to 180 days to conclude. During the course of this 1031 exchange in Minneapolis, Minnesota, swaps can be performed simultaneously.
This means a building can be renovated to prepare it for the trade. However, the project should still follow the 180-day timeline of a 1031 exchange in Minneapolis, Minnesota. Otherwise, it will be considered as a personal property and won’t qualify for the transaction anymore.
In this type of transaction, one acquires the replacement property before a 1031 exchange in Minneapolis, Minnesota takes place. The estates will be transferred to a mediator and an agreement must be signed.
Note that a swap must take place 45 days upon the replacement property’s transfer, and a transaction must be completed within the normal 180-day timeline. Otherwise, taxpayers who are found to own both assets may be punished by law.
If you need help with a 1031 exchange in Minneapolis, Minnesota, our team at Christianson and Company is here for you. Contact us today. We offer a unique and informed perspective to help achieve your desired results.
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