Are you looking for 1031 Exchange Minnesota rules for 2020? Before we delve into that, you must understand this tax-deferral strategy inside-out. A 1031 exchange is an investment strategy that lets you defer capital gain taxes on trading an investment property for a ‘like-kind’ property. When doing a 1031 exchange, you must abide by the rules established by the IRS. If you fail to fulfill any of the requirements listed by the IRS, you won’t be able to defer taxes. It’s as simple as this.
Start from the scratch, sell your investment property first.
The first step towards completing a 1031 exchange is closing on the sale of your investment property. List it for sale, find a buyer, and complete the transaction. In the next step, sign a 1031 exchange agreement along with a Qualified Intermediary (QI). Not to mention, it is mandatory to involve a QI in a 1031 exchange. It’s for your benefit. A Qualified Intermediary takes your exchange forward on your behalf. They help you identify a replacement property, speak to the seller as your representative, and close the exchange.
Identify a replacement property as early as possible.
Legally, you get 45 days from the sale of your investment property to identify one or more replacement properties. Once this 45-days period ends, you cannot ask for an extension. It is suggested that you start making a list of potential replacement properties days before you sign the agreement. Why? Well, there are handsome chances that you may not get the desired property when required. Therefore, keeping a 1031 exchange property list can work in your favor. You can identify as many replacement properties as you like, make sure the value of the replacement properties doesn’t exceed or fall short of the selling price of your investment property (relinquished property). Else, you will have to pay taxes on the remaining amount.
Work in tandem with your QI, speak to the seller.
You must not take anything for granted when doing a 1031 exchange. Even if you’ve identified a replacement property, don’t think the job is done. Complete the paperwork with your QI and request the seller to hand over the property before 180 days. Yes, you get 180 days to complete your 1031 exchange. Again, don’t think for an extension, you won’t get it. Keeping the dates in mind and working according will help you complete your exchange without any problems.
Not to forget, like any real estate investment, a 1031 exchange involves a large sum of money. It is recommended that you talk to your advisor first or seek help from a 1031 exchange before you invest.