Can I take cash from my 1031 exchange?

When an investor wants to sell a business or investment property and defer capital gains taxes, one of the questions that often gets put on the table is whether he or she can pull some money out of the deal.

While the whole point of conducting a #1031 exchange is to defer all capital gains taxes on the sale of your investment or business property via the purchase of new investment or business property, it is possible to receive some of the sale proceeds as cash.

If you take money out of the deal at closing, it is considered “boot” by the IRS. Boot is taxable in the year of the transaction. However, if the 1031 exchange documentation is structured properly, you can receive boot without invalidating the rest of your exchange.

To learn more about 1031 exchanges or our qualified intermediary and replacement property locator services, please visit our website.