Know The Detailed 1031 Exchange Minnesota Rules

by Angilina Taylor 1031 Exchange Expert, Tax Consultant

1031 exchange, also known as “like-kind exchange”, refers to the application of the process mentioned in section 1031 of the United States Internal Revenue Code. This process facilitates the real estate investors to avail maximum profit from their investments by replacing one investment property for another like-kind property. An investor, however, before using 1031 exchange for their own benefit must be well aware of the details and rules of this law. If you want to invest in a property in Minnesota then it would be advisable for you to be well informed regarding the 1031 exchange Minnesota rules. This will help you to make the most out of your investment.

The like-kind exchange in real estate investing

In Minnesota real estate investing, investors can implement the replacement process to increase their revenue and profits. With the exchange process, you can also avoid any severe taxes that may apply to your investment and thus cut your profits short.

How to implement 1031 exchange in real estate investing?

If you have a property for which you need to pay tax then you can save yourself from paying heavy tax by implementing 1031 exchange. It is a tax-deferred exchange that allows you to dispose of your asset and acquire a new asset of a similar manner without making it taxable by selling the first asset. You can use this ininvesting in real estate to include the selling of a real estate property and the purchase of another like-kind real estate property without having to pay taxes on the profits that you have gained from selling the old property. Investors use this method to increase their investments and grow their business eventually while avoiding paying taxes on the sale of each property they hold. With this method, you can keep selling your old property and purchasing new similar properties successfully and keep escalating your investment business and expanding it over the years.

The Rules of the 1031 Exchange Minnesota

There are certain rules, which you need to follow if you want to implement 1031 exchange. These rules have evolved over the years from the decree, the URS Revenue Rulings, and, to a lesser degree, from Private Letter Rulings. Here, we have discussed the basic 1031 exchange Minnesota rules.

Like-Kind Property

This rule declares that in order for the replacement to be effective, the properties should be similar. According to this rule, the property that you want to sell i.e, the relinquished property will be real property or personal property, or both while the property that you will buy or the replacement property will be either a real property or personal property, or both. It states that you cannot exchange a real property with personal property and vice-versa.

45-day period rule

The 45- Day Period rule is one of the most important rules of the 1031 exchange. It states that after you sell your old property within 45 days, you have to submit to your Qualified Intermediary in writing a list of the like-kind properties that you want to purchase a replacement property.

180 day rule

According to this rule, you must close on your purchase of the replacement property within 180 days after the exchange date. If you fail to do so, you will suffer severe consequences like:

The unit holding the funds will distribute your net sales proceeds.
You will lose your permission to use the 1031 Exchange.
You will be liable to pay the Capital Gains Tax and the Depreciation Recapture Tax on the sale.

There are several 1031 exchange companies in Minnesota among which 1031xchange.com is one of the leading companies. It provides 1031 exchange qualified NNN, TIC and DST property information from different sellers available across Minnesota. Contact 1031xchange.com for details.