All Forum Posts by: Dan Keem

@Dave Foster perfect. Thanks you’re a huge help!!

@Dave Foster thanks for your insight! It makes perfect sense. I would like to clarify one last thing with you. 

In my scenario=>

I have had a rental property for 10 years, bought it in 2010. I want to selling it except there’s a big capital gain on the investment property. So instead, I perform the 1031 exchange. For the first two years, I keep it as a rental property per regulation. Then, I move in for 3 years turning it into a primary residence. I have held the replacement property for a total of 5 years aiming for the long term capital gain exclusion of $250k/$500k.

Here’s my question- when I decide to sell it, is my ratio of (qualified use) / (total property use) = 3/5 just counting the years in the replacement property? Or.. do I carry the 10 years of non-qualified period prior to the 1031 exchange making it = 3/15?

=> when I sell it, will the prorated gain exclusion be 3/5 or 3/15? 

Haha thanks @Wayne Brooks. Looking forward to hearing from you Dave. 

@Wayne Brooks thanks for your reply. I would like to clarify with you once more— 

In the same scenario, I’ll provide a bit more context. 

1) bought the property for 500k in 2010. Rented for 10 years. Appreciated to 800k

2) performed 1031 exchange and bought a new property for 800k. 

3) same scenario as above. Now the property is 1M before sale. 

4) in that case, I’ll pay full cap gains gain on 300k from prior to 1031 exchange. I’ll pay depreciation recapture from the new cost basis. AND, I’ll be able to not pay taxes on 3/5 * 200k = 120k. Remaining 80k gain from the new property is taxed as cap gains. 

Does this sound right?

I hope this finds you well! I have a scenario I would like your input.

I have had a rental property for 10 years. I want to access cash by selling it except there’s a big capital gain on the investment property. So instead, I perform the 1031 exchange. For the first two years, I keep it as a rental property per regulation. Then, I move in for 3 years turning it into a primary residence. I have held the replacement property for a total of 5 years aiming for the long term capital gain exclusion of $250k/$500k. 

Here’s my question- when I decide to sell it, is my ratio of (qualified use) / (total property use) = 3/5 just counting the years in the replacement property? Or.. do I carry the 10 years of non-qualified period prior to the 1031 exchange making it = 3/15?

Thanks in advance!