1031 exchanges let property owners swap investment properties under certain conditions. This post offers a simple, general look at how the process works.
If you’ve spent any time in the world of real estate investing, there’s a good chance you’ve heard the term “1031 exchange.” It tends to come up when someone’s selling one property and planning to buy another—especially when they’re looking to delay capital gains taxes.
But what exactly is a 1031 exchange? The concept can sound a little technical, but at its core, it’s a commonly used tool for structuring certain real estate transactions. Let’s break it down in simple terms.
So, What Is a 1031 Exchange?
A 1031 exchange gets its name from Section 1031 of the Internal Revenue Code. It refers to a process where a qualifying property owner sells one investment property and purchases another—while meeting specific conditions that may allow them to defer paying capital gains taxes on the sale.
This type of exchange is generally used with properties held for investment or business purposes. It doesn’t apply to personal residences or vacation homes used strictly for personal enjoyment.
What Does “Like-Kind” Really Mean?
One of the more common phrases in any discussion of 1031 exchanges is “like-kind.” That doesn’t mean you have to swap a duplex for another duplex or a storefront for an identical one.
Instead, “like-kind” simply means the properties involved must be similar in nature—both being used for investment or business purposes. For example, trading a rental home for a small office building could qualify, depending on how both properties are held and used.
How the Timeline Typically Works
There are two important deadlines that come into play with a 1031 exchange:
The exchange also has to follow specific procedures, including working with a qualified intermediary who holds the funds during the transition.
Why Real Estate Investors Use It
1031 exchanges are popular among real estate investors who want to shift their portfolios without triggering an immediate tax bill. They’re used in a variety of scenarios—whether someone is upgrading to a larger building, relocating investments, or simply rebalancing their assets.
While it’s not a strategy that applies to every situation, it’s widely used in the investment world and often built into long-term real estate plans.
Final Thoughts
At its heart, a 1031 exchange is a way for qualifying property owners to trade one investment property for another without immediately recognizing capital gains. While the rules can be technical, the goal is pretty straightforward: keep your investments working for you, and defer taxes in the process.
If you’re looking to learn more about how 1031 exchanges are generally used in Minnesota, the team at Borden, Steinbauer, Krueger & Knudson, P.A. can provide general information.
Born and raised in St. Cloud, Minnesota, Sam is thrilled to return to Central Minnesota after passing the bar exam in 2024. Sam's diverse experience spans roles with the Douglas County Attorney’s Office (Civil Division), a Nebraska lobbying firm, Hudl, and the University of Nebraska Civil Clinic. Through these positions, he gained valuable exposure to various areas of law, including civil litigation, policy advocacy, and client counseling. Early in his legal career, Sam is eager to leverage his skills and experiences to deliver effective and personalized legal solutions for BSKK’s clients.
Areas of Practice:
- Business Litigation
- Construction Litigation
- Property Law & Real Estate
- Contract Disputes
- Personal Injury
- Probate/Trust Disputes
- Landlord/Tenant
- Family Law
Education:
- University of Nebraska College of Law, Lincoln, Nebraska, 2024, J.D.
- Concentration in Real Estate and Business Transactions
- North Dakota State University, Fargo, North Dakota, 2019, B.S.
- Honors: Magna Cum Laude
- Majors: Political Science and Management Communication
Bar Admissions:
- Minnesota 2024
Professional Memberships:
- Minnesota State Bar Association
David V. Hurt is a seasoned litigator who has been advocating for individuals, families, and businesses across Minnesota since 2012. His practice is rooted in a practical, results-driven approach that blends strategic litigation with thoughtful dispute resolution. David's clients trust him to navigate complex legal issues with clarity, efficiency, and unwavering commitment.
He began his legal career clerking for the Honorable John G. Melbye in the Ninth Judicial District of Minnesota, where he gained invaluable perspective on trial practice and judicial reasoning. Since then, he has built a diverse portfolio of experience at firms in Minneapolis, Washington, D.C., and Pennsylvania—litigating matters ranging from corporate and construction disputes to aviation claims.
David’s practice spans a wide range of civil matters, including business formation and litigation, real estate and land use disputes, probate and trust litigation, and family law. He is particularly experienced in resolving high-conflict disputes and routinely employs alternative dispute resolution strategies to secure favorable outcomes for his clients while minimizing cost and disruption.
Areas of Practice:
Education:
Bar Admissions:
Professional Affiliations:
Virginia "Ginny" Knudson represents individuals and businesses in various areas of law, including, estate planning and probate, business and corporate, real estate, and governmental relations. Ginny provides mediation services in divorce and custody, especially for business owners and high wage-earners, as well as for real estate, probate and business disputes. Ginny has been selected as a top attorney by Minnesota Super Lawyer Magazine from for 13 years.
Areas of Practice:
– Estate planning
– Business and corporate
– Real estate and landlord representation
– Probate disputes, guardianships and conservatorships
– Municipal and governmental relations
-- Mediation
Education:
– University of Minnesota Law School, Minneapolis, Minnesota, 1994, J.D.
– Honors: Cum Laude
– University of St. Thomas, Minneapolis, Minnesota, 1991, B.A.
– Honors: Summa Cum Laude
– Honors: Aquinas Scholar
– Major: Economics, Spanish, Minor: Business
Bar Admissions:
– Minnesota, 1994
– U.S. District Court District of Minnesota, 1994
– U.S. Court of Appeals 8th Circuit, 1996
Professional Memberships:
– St. Francis Church Finance Council, 2004–present, Chair and Trustee
- Essentia-St. Joseph's Medical Center, Directors Council, 2020-present
- Lakes Area Music Festival Board, Board Member 2022-present
– Brainerd Area Chamber of Commerce, 2016-2022, Board Member and Chair
– Mount Ski Gull, Board Member, 2014-2019
– Benevolent and Protective Order of Elks, Brainerd Lodge #615
– Zonta International, 1999–2018
– Jaycees, Brainerd, 1998–1999
– Aitkin/Crow Wing County Bar Association, 2000–2001, President
– Aitkin/Crow Wing County Bar Association, 1999–2000, Vice-President
Patrick has been practicing law since 1980, dedicating over 90% of his career to representing personal injury victims and their families, as well as handling a wide range of civil litigation matters. He is a Certified Trial Specialist recognized by the Minnesota Bar Association and was named a leading American attorney in personal injury law by the American Research Corporation. His professional excellence also earned him recognition as a Super Lawyer by Minnesota Law & Politics, placing him among the top six percent of attorneys in Minnesota.
Pat is enjoying a well-deserved retirement after 40+ years of practice. We thank Pat for his years of dedication to the firm and his service to the Brainerd Lakes Area. His legacy is marked by a deep commitment to justice, compassion for clients, and significant contributions to the legal profession.
Areas of Practice (during his active years):
Plaintiff’s Personal Injury
Civil Litigation
Real Estate Litigation
Construction Litigation
Contract Litigation
Mediation and Arbitration
Education:
– University of North Dakota School of Law, Grand Forks, ND – J.D., 1980
- Honors: Graduate of the Year, Bruce Inn
- North Dakota Law Review, 1979–1980
– Concordia College, Moorhead, MN – B.A., 1974
- Major: Business Administration / Hospital Administration
Bar Admissions:
Minnesota, 1980
U.S. District Court, District of Minnesota, 1981
Professional Memberships:
American Bar Association, Member
Minnesota State Bar Association, Member
American Association for Justice, Member
Minnesota Association for Justice, Member
Crow Wing-Aitkin County Bar Association, Past President
Brainerd Area Chamber of Commerce, Past Board Member
Brainerd Jaycees, Past President (1981–1982)
Benevolent and Protective Order of Elks, Brainerd Lodge #615, Past Exalted Ruler
P.O.R.T. Group Home, Past Member, Board of Directors
