Troy Stafford

What Are 1031 Deferred Tax Exchanges? Troy Stafford Minnesota Land Specialist | CPA When it comes to selling land or investment property, taxes can take a serious bite out of your gains. But what if you could defer those taxes—and reinvest your full equity into another property? That’s exactly what a 1031 exchange allows you to do. Used strategically, a 1031 deferred tax exchange helps landowners, farmers, and investors preserve wealth, scale their portfolios, and transition into properties that better fit their long-term goals—all while deferring capital gains tax. In this blog, we’ll break down how 1031 exchanges work, when to consider one, and how to avoid common pitfalls. What exactly a 1031 deferred tax exchange? A 1031 deferred exchange, also known as a like-kind exchange, is a tax-deferred transaction that allows investors to defer or delay, ideally ultimately eliminate, capital gains taxes on the sale of an investment property.  In essence the transaction allows the investor to “trade” out their investment property if it is held for productive (business) use or investment purposes What are the specific requirements of the program? Target property must be held for productive (business) use or investment purposes Intent to hold is critical – if held to “flip” or resell, the IRS may disallow QI must hold funds during process with no taxpayer access as that my disqualify transaction from the deferred tax exchange Same taxpayer requirements – owner of relinquished and target properties must match  Disregarded entities may be exempt from this requirement Are there timing restrictions that need to be considered? Required to identify replacement properties within 45 day of closing of relinquished Identification must be in writing and clear – Tax ID and legal description ideal Taxpayer may utilize the 3 property rule or 200% rule 3 property – any 3 properties regardless of price 200% - 4 or more properties with a combined value of <= 200% relinquished value  Closing on target property must occur within 180 days of closing of relinquished What is the ultimate goal of doing an exchange: The end goal is to defer taxes to a later date or ultimately eliminate them by virtue of a “stepped-up” basis Stepped up basis is not available to irrevocable trusts What are the benefits in working with an experienced exchange expert? Intimate knowledge of the IRS requirements with numerous transactions conducted Can handle the process start to finish and coordinate the parties Access to an agent with an active CPA license  Vast network of QI’s and Experienced Attorneys Investment alternatives available Delaware Statuary Trust Reverse 1031 Exchanges Deferred Sales Trust   Disclaimer: Please note the above information is meant a guideline and should not be considered tax or legal advice and since each transaction is unique, you are strongly encouraged to contact us in addition to reaching out to your tax accountant or attorney for information specific to your situation!    Do you want to learn more? If you’re considering buying, selling, or managing land, reach out to a local High Point Land Company Agent today. For more questions regarding land real estate, visit our YouTube Knowledge Center.    Living in the Dodge County area all his life and working on two local dairy farms throughout high school and college gave Troy immense respect for farmers. After seven years in public accounting, Troy has worked in various private industries in both Controller and CFO capacities, including 10+ years working for two different farm supply, producer owned, cooperatives. Mr. Stafford also holds an active CPA license and has an MBA degree. Contact Troy at 507-259-3047 or email Troy@highpointlandcompany.com.

Common Misconceptions in Selling Row Crop Land Troy Stafford Minnesota Land Specialist | CPA In the sales evaluation process, there are number of common misconceptions in selling row crop land that people fear may be completely unfounded as it relates to the sale of said asset. Each situation is different, so there is no one-size-fits-all approach. A professional should always be consulted to address your specific needs. Here are a few examples of such misunderstandings. 1. We cannot sell our farmland as we are under a contract with the grower for the upcoming year or multiple years? This is a widespread misconception—and it’s not true. Land is frequently sold while under contract for the upcoming or even future years. In most cases, the buyer assumes the rights and obligations of the existing lease. This makes the transition smooth. Rents and property taxes are typically prorated based on a 365-day year and the closing date. For example, in case of a June 30 closing, the sellers would get credit for ½ of the annual rental income and be responsible for ½ of the annual property taxes. As with most terms of any purchase agreement, these terms are negotiable between the buyer and sellers. 2. I inherited this property with my siblings and we cannot come to a consensus to sell therefor my hands are “tied”? This answer on this situation depends on the type of ownership type (Tenants in Common or Joint Tenants) in relationship your state specific statutes. In some cases, you may be able to sell your undivided interest. The buyer would then become a co-owner with the same rights to the entire property. That said, this can get complicated. A better option may be to get everyone aligned early. An experienced land agent can help guide all parties to a fair and informed decision. 3. My parents (grandparents) went into a nursing home and there is a lien on the farm so I cannot sell it? This is another common misconception among land owners. The farm can still be sold, and the lien can be paid off at closing, much like a mortgage. This process is relatively seamless as well and has minimal impact on the sales process. 4. Any real estate agent can sell a farm so it really does not matter who I chose to sell it? Unfortunately this statement is true and profoundly not true in the same vain. Unlike residential agents, land specialists understand key factors like soil types, fertility, tiling, drainage, easements, zoning, government programs, and local markets. These details can make or break a deal. A knowledgeable land agent adds value at every step.   Each and every property is unique and working with a land specialist will add value every step in the process. That also means different approaches sell different properties much more effectively, this is one reason knowledge is so powerful. The right agent also knows which sales method—live auction, sealed bid, or traditional listing—is best for your property. They’ll market your farm with high-quality video, drone footage, and photos to make it stand out to buyers. This ensures you get maximum exposure and the best possible return. You also want to select an agent the produces “top-notch” marketing material inclusive of high quality videos and pictures to ensure that your property looks as good as possible to potential buyers. At the end of the day, since this is more than likely one your largest lifetime decisions, it is imperative that you find an agent that specializes in land transactions to help you in the preparation work up to and including through the sale. This agent should be someone you trust that is going to work hard on your behalf with your best interest in mind! Disclaimer: Please note the above information is meant a guideline and should not be considered tax or legal advice. You are encouraged to contact us in addition to your tax accountant or attorney for information specific to your situation!   Do you want to learn more? If you’re considering buying, selling, or managing land, reach out to a local High Point Land Company Agent today. For more questions regarding land real estate, visit our YouTube Knowledge Center.    Living in the Dodge County area all his life and working on two local dairy farms throughout high school and college gave Troy immense respect for farmers. After seven years in public accounting, Troy has worked in various private industries in both Controller and CFO capacities, including 10+ years working for two different farm supply, producer owned, cooperatives. Mr. Stafford also holds an active CPA license and has an MBA degree. Contact Troy at 507-259-3047 or email Troy@highpointlandcompany.com.

Don’t Let Taxes Drive Your Decisions Troy Stafford Minnesota Land Specialist - CPA Many landowners worry about the tax implications of selling row crop land, often due to lack of understanding. As a general rule, if you sell your land for more than you paid (basis) for it, you have a capital gain that may be subject to taxation. Special rules apply to gifted or inherited land, which we will cover later. Here are tips so you don't let tax tail wag the dog. Understanding Tax Implications In order to better understand the sale implications, it is imperative to have an understanding of some relative definitions. The IRS classifies land as a capital asset, with tax treatment based on the length of the holding period. Long-term (LT) capital gains apply to assets held over a year. Short-term (ST) capital gains cover assets held for a year or less. Your land's basis includes the purchase price and any improvements made during ownership. Gifted or inherited land follows different tax rules. If properly done, recipients may receive a “stepped-up basis” thereby adjusting their basis to the Fair Market Value (FMV) at the time of the donor’s death. This is a very generous tax treatment afforded by the IRS (tax code) and should be considered when accounting for estate planning purposes as well. The reason the holding period classification is critical is the taxation of each of these 2 categories is significantly different at the Federal (IRS) level. Short-term capital gains are generally taxed at your ordinary income level (marginal tax rates) whereas Long-term gains may be afforded special tax considerations. For the 2025 tax filing year, these LT rates are 0%, 15%, and 20%, depending on the taxable income of the individual. For ST gains, the 2025 bracket is 0 - 37%, once again depending on the taxable income of the individual. Needless to say, this LT capital gain classification may result in substantial tax savings. Strategies to Reduce Capital Gains Tax Exposure In addition to holding the land for a year or more, there are a number of other sales strategies that may mitigate your tax liability as follows: Deferred (1031) Tax Exchange – If you properly identify and purchase another investment property within a specified period, you may be able to defer the gain on your sale. Strict criteria apply, so consult an experienced land expert and tax advisor. Deferred Sale – This involves pushing the sales date to the future thereby strategically placing the income into a different, generally more favorable, tax year. Installment Sale – This concept is similar in nature to the deferred sale as it pushes the sale into the future, however it may be over multiple tax years. This is often accomplished with a “Contract for Deed” structure whereby the taxes are paid on a “pro rata” share of the gain in the year the payments are collected. To maximize tax strategies, meet with professionals and your tax advisor before selling. Contemplating the Sale Critical in the evaluation on whether or not to sell, a number of additional questions may require analysis first. For example you might want to consider the rational for selling in relationship to the intended use of the proceeds. Additionally, there are times when the tax implications of selling may be less drastic than a market correction thereby leaving you with less in the end. Each of these considerations requires further exploration before an “educated” decision is made in your specific situation. Making an informed decision as to what is best for you and your family and combining that with tax mitigation strategies will help to add value to the difficult decision you are faced with, but please take the time to understand the process and how it may ultimately affect your situation by utilizing professionals before and during the sales process! There are a number of other tax considerations outside of the above mentioned. These include state tax implications for capital gains, Alternative Minimum Tax situations and Net Investment Income Tax exposure. Given the complexities, consulting a knowledgeable expert alongside your tax advisor is essential. That’s why it’s imperative to meet with someone knowledgeable on the subject in addition to your personal tax advisor as individual situations may vary on a case by case basis. Disclaimer: This information serves as a guideline, not tax or legal advice. Every transaction is unique, so consult us and your tax professional for case-specific guidance.   Do you want to learn more? Don't let the tax tail wag the dog - reach out to a High Point Land Company Agent today. For more questions regarding land real estate, visit our YouTube Knowledge Center.    Living in the Dodge County area all his life and working on two local dairy farms throughout high school and college gave Troy immense respect for farmers. After seven years in public accounting, Troy has worked in various private industries in both Controller and CFO capacities, including 10+ years working for two different farm supply, producer owned, cooperatives. Mr. Stafford also holds an active CPA license and has an MBA degree. Contact Troy at 507-259-3047 or email Troy@highpointlandcompany.com.