1031 exchange - rehab included in proft

[Adam Macy]

I am considering doing a 1031 exchange. I put extensive rehab into the property being sold. Does the amount of rehab put into the property reduce the profit from the sale? For example:

1. Purchase price : $100K

2. Rehab: $50K

3. Sale price: $200K

In the eyes of the IRS (and 1031 exchange) is the profit $50K because of the rehab that was put into it or $100K because the IRS doesn't care about rehab it is basically the difference in the sale price and purchase price?

Thanks!

Adam