How to 1031 Exchange Cargo and Shipping Containers into Mineral Rights and Royalties
Shipping containers and cargo trailers are some of the most versatile assets in the world. They are useable to store just about anything (including people). Shipping containers have been utilized by many real estate developers too! Far and wide seeking spacious protection from the outside elements.
Are you a company or private investor with connections in the manufacturing or transportation industries? Then you may have an opportunity to sell shipping containers in large quantities to independent developers. With big-ticket deals pushing into the five digits, considerable taxed amounts can accumulate after the sale of a shipping container.
In the United States, taxpayers have the unique opportunity to defer capital gains taxes paid on large assets. This includes cargo and shipping containers with a 1031 exchange. By doing so, the potential profit of the sale is expandable with the investment in a new property. Below, we will break down the steps of a 1031 exchange in detail when selling a shipping container.
How to Sell Shipping Containers
For a lot of people, selling a shipping container is the easy part. Shipping containers are available for sale on the open market. Now and more than ever. Finding a buyer is generally not difficult when exploring the available avenues of today. This includes online listings and networking.
This is especially true as demand for shipping containers has skyrocketed in recent years. Depending on the condition and quantity of your shipping containers, companies and representatives from the following industries have interest in a purchase:
- Commercial development (shops, restaurants, parking, etc.)
- Residential development (homes, condos, apartments, etc.)
- Public development (schools, libraries, etc.)
- Determining the Value of Trailers and Shipping Containers
For sellers, increased global demand for high-quality shipping containers has increased the average cost per unit by an estimated over 300%. While the cost to purchase can still be relatively low, it is the cost to ship the containers, ironically, that typically drives up the value by two or three times the original buying price. With transportation in mind, the sale of a large fleet of containers is expandable when finding a local seller.
Taxes Paid on Selling Cargo and Shipping Containers
While one or two shipping containers are unlikely to warrant considerable taxation, big industry sales may are foreceable to turn over nearly 40% of their earnings to federal and local governments. Aside from sales and local taxes, considerable transactions may also require single sellers to pay capital gains taxes on the release of the asset. As we have mentioned above, this can be avoided by utilizing a 1031 exchange.
Selling Trailers and Containers with a 1031 Exchange
Capital gains taxes essentially penalize investors for liquidating their property. In an effort to retain as much capital as possible, a 1031 exchange is used to virtually “trade” an asset for a sold item, deferring capital gains taxes.
If you were to sell your inventory of shipping containers, then you would be able to eliminate all capital gains taxes otherwise paid if you choose to purchase a new asset through a 1031 exchange. Likewise, partial deference is possible through the reinvestment of one or multiple lower-valued items.
Trailers and Containers Like-Kind Properties
When “trading” properties in a 1031 exchange, shipping containers must be replaced with an asset that is a “like-kind” property. Under the IRS code, most personal property can qualify for a reasonable exchange with a shipping container, which includes both tangible and intangible assets. Among other choices, the following can be considered like-kind properties of cargo and shipping containers:
- Trailer parks
- Golf Courses
- Intellectual property
- Water and ditch rights
- Mineral rights and royalties
- And many more
Trailers and Shipping Containers 1031 Exchange Timeline
When the deed of sale has been completed, a taxpayer’s eligibility for a 1031 exchange begins. In order to remain active, shipping container sellers must identify at least one reasonable replacement asset within 45 days of the sale. The taxpayer can then submit up to two more properties for approval, regardless of their value within the full 180-day timeline for a valid 1031 exchange.
1031 Exchange Intermediaries for Selling Trailers and Containers
In order to meet deadlines and maximize their new investment, many busy taxpayers choose to utilize a 1031 exchange in the sale of cargo and shipping containers. Not only do intermediaries know the ropes for filing approved government paperwork, but specific industry connections may also allow open doors for wise reinvestments.
Why Purchase Mineral Rights and Royalties?
If you are evaluating new property options after the sale of cargo and shipping containers, then it is overwhelming considering all of the options available. Unfamiliar territory may make you reluctant to test new investment waters. Moreover, many successful investors know the strength of active mineral rights in a portfolio.
As mineral rights owners, Americans have the opportunity to lease the subsurface of a given plot of land to an energy company. In the lease, mineral rights owners are compensable for their investment through a stream of mineral rights royalties. These royalty payments are typically delivered monthly, as a fixed percentage of resource sales defined in the lease agreement.
Around the world, it is very rare for property owners to be able to split their estate and sell or lease their personal mineral rights. In today’s world of increasing energy consumption, mineral rights are very valuable for the ongoing demand for the earth’s natural resources.
In the third decade of the 21st century, shipping containers are one of the most surprisingly valuable assets. This is mainly for a large number of industries. If you choose to sell when the time is right, considering a 1031 exchange may be a very valuable decision. This is for long-term financial health and security. When considering new investments, mineral rights and royalties are an excellent way to secure a hands-off property. It is a long-term business to generate passive income.
If you have further questions about 1031 exchange cargo and mineral rights, feel free to reach out to us here.
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