Which qualified intermediary to use for 1031 exchange?

[Keith N.]

I’m going to list one of my rentals for sale in about a month when the tenant moves out.

I will probably net about 60K from the sale (after all transaction fees). My goal is to use about half of this net profit (30K) and re-invest into a new rental house (20% down on a ~100Kish house) to keep myself “in the game” and avoid being fully taxed for long term capital gains.

i know very little about 1031

What QI have you used? What were the fees and stipulations?

I’m in North Carolina if that matters.

[Dave Foster]

@Keith N., One of the most important roles the QI will fill is to guide you through the process so you avoid those unintentional but costly "whoops" moments.  Especially if you're not experienced in the world, application, and strategy of 1031 you want to find a full service QI that you jell with and who acts in a much larger capacity than just a form filer.

Speaking of "whoops" moments, I see where you're trying to get to - it's time to pull some chips off the table and enjoy profits while still "staying on the ride somewhat for a bit.  Unfortunately @Ashish Acharya and I are seeing the same difficulty with your scenario.  In order to defer all tax you must purchase at least as much as your net sale (the $60K after closing costs) and use all of the net proceeds (I'm guessing there was no debt on that property so net sale and net proceeds are the same).

You can purchase less than you sell and you can take cash out but you'll pay tax on the difference as if taking profit out.  The problem is that the IRS simply says that the first dollar out is a dollar of profit no matter what you call it :( . So selling for $60K and only buying with $30K of the cash (even if you bought $60K total) would leave you paying tax on the $30K in cash.  So you'd pay tax on that difference and that means essentially no savings from doing the 1031.

If you want to cash out some fun money the answer is to do a complete 1031.  Use all $60K of cash and buy at least $60K of investment real estate.  Then after the fact when the 1031 is over refinance that property and take the cash out.  Now you can use it anyway you want.  It is not taxable because it's not part of the 1031.  And the tenant is going to be paying the mortgage.