1031 exchanges come in two forms – forward and reverse. Both accomplish the same ultimate goal of tax deferral, but they differ in execution. We have been facilitating 1031 exchanges in Mankato and across southern Minnesota for decades. For help with your tax-deferred exchange, contact one of our Mankato qualified intermediaries today at 612.643.1031.
How to Set up a Reverse 1031 Exchange
Reverse 1031 exchanges are set up a little differently than forward exchanges, but the end result is still the same – deferring your taxes on the sales proceeds of your property. In a traditional forward exchange, you sell your relinquished property first, and then identify and close on your replacement property second. This order of operations is switched in a reverse exchange. For example, let’s say you own some agricultural equipment on the outskirts of Mankato and you’re considering a 1031 exchange. One day you find for sale some newer farm equipment for sale in New Ulm. With a reverse exchange, you could purchase this new equipment first, and then sell your old property within the 45 day / 180 day time periods.
A reverse 1031 exchange is a particularly good strategy in a hot seller’s market, where properties are selling fast. If you find a great replacement property before you’re able to sell your relinquished property, a reverse exchange is a great way to lock up that new property before it’s sold.
Benefits of a Reverse Exchange
The benefits of a reverse exchange are the same as any other 1031 exchange. When you sell real estate, or any large piece of personal property, you are required to pay taxes on the capital gains of the sale. Section 1031 of the Internal Revenue Code allows you to defer those capital gains taxes and re-invest that money into another similar (or like-kind) property. As a result, you can keep your money working for you in another investment property, and avoid a hefty tax bill.
Mankato Reverse 1031 Exchange Company
The safest way to approach a reverse 1031 exchange is to hire a 1031 exchange company who facilitates exchanges on a daily basis. Having an experienced group of 1031 exchange pros by your side will keep you insulated from receiving the net proceeds, and ensure that you have a successful transaction. Don’t fall into the common traps of a 1031 exchange. Get the help of a Mankato 1031 intermediary today and get started with your exchange – 612.643.1031.