Hello everyone. I am doing a 1031 Exchange and want to verify the portion of the gain which is taxable.
1. Relinquished property is being sold for $159,000.
2. Adjusted Basis is about $60,000.
3. Fix up expenses to sell the property are $19,000.
4. Cost of sale are $9,000.
5. Replacement Property is being bought for $123,000.
6. Closing costs for the replacement property are $4,000.
Please provide me with your ballpark estimate of the taxable portion of the capital gain.
When I spun the wheel, it said $23k taxable.....not sure how the depreciation recapture vs cap gains is distinguished.
Can't tag Dave Foster.
@Craig Lessler , You'll pay tax on the rough difference between the net sales price of $159Kish and the net purchase price of $127Kish ($32K). You are buying less than what you sold so the IRS views that as taking profit (boot). Whether that is deemed to be recaptured depreciation first or gain first is a cpa by cpa preference. If your total profit plus depreciation taken is greater than $32K then you will still have a savings from the 1031. If your total gain plus depreciation is $32K or less then there will be no savings from the 1031.
Thanks. Do the $19,000 fix up cost to get the relinquished property for sale and the selling costs get added to the basis of the replacement property?
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