Taxable Gain on a partial 1031 Exchange

3 Replies

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.

Thanks.

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?

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here