Selling for less than purchase to avoid capital gains

[James Wilcox]

I recently talked to a motivated seller that is interested in selling a small multi-family property. He states that he is looking to avoid capital gains tax and wants to do a 1031 exchange. He purchased the property for 100k and now wants to sell for 75k. My question is if he is selling for less than his purchase does he even need to worry about capital gains? I think there would need to be "gain" there to be a tax. 

[Dave Foster]

@James Wilcox, Recapture of depreciation would be the only thing that would get him. And if his purchase price was only 100K and he's starting with a 25K loss plus whatever improvements he's made it would take a long long hold by him to have any kind of recognized gain.  But you never know... 

Best thing you could to is to verify that purchase price and either lead him through a discussion with an accountant (pay one a couple hundred bucks to give him a good analysis).  

Or have him sell to you on an owner carry note/installment sale so whatever tax he's envisioning is at least spread out.