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Funds for 1031 Exchange Question
8 posts by 4 users
Jim F.Real Estate InvestorAlabama 
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Can someone tell me a bit about the 1031 process. What I mean is, I have a property I am selling and I'd like to 1031 it. Do I have to place all funds I recieve when I sell into the new property? Or, can I only place profits into and keep my equity from the previous property as cash deposit? |
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Bill E.Real Estate InvestorSan Diego, California 
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I am assuming that you want to defer 100% of your depreciation recapture and capital gain income tax liabilities. If so, there are three requirements that you must meet. Trading Equal or Up in Value You must 1031 exchange (trade) equal or up in value based on your net sales price. So, if your net sales price for your relinquished property is $500,000.00 you must acquire like-kind replacement properties valued at $500,000.00 or more. Reinvesting 100% of Cash/Equity You must reinvest 100% of your net cash proceeds/equity received and held by your Qualified Intermediary into your like-kind replacement properties. You will recognize and pay taxes on any amount that you pull out of your transaction. You will not jeopardize your 1031 exchange if you pull cash out, but you will incur income taxes. Replace Your Debt You must replace the value of your debt that was paid off as a result of selling your relinquished property with new debt in the same amount on your like-kind replacement properties. The easiest way to look at it is to trade equal or up in value and reinvest 100% of your cash equity, and the difference will be the correct amount of new debt to put on your like-kind replacement properties. Does that answer your question. |
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MelCES1031
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Grinder, There are many things you can do alternatively to fix this situation. PM or email me and I will explain. |
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John C.Real Estate Investor
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Listen to William as he is an experienced professional when it comes to 1031 exchanges. There is no need to do a 1031 if you are prepared to pay the tax bill. Hence you have choice. John Corey |
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MelCES1031
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WHOA - I feel as if I am being attacked here. John I never said William was wrong. William is a very smart guy and I am sure he is very experienced and professional. I simply stated there were other ways. He is right by all means but that doesn't mean that this person should have to give up his tax money. No one should. With proper tax planning you can exchange through life, die and NEVER pay tax. It all depends on what your long term goals are. I understand that William has been on this site longer than I and you have some kind of relationship built but I assumed that here everyone would be receptive as you all are real estate investors and can appreciate that everyone has some knowledge to share. I am just here sharing my knowledge like everyone else. I had such a huge respect for you. You seem to be one of the most experienced on here. Do you really feel that was warranted? That you should devalue me? How could you possibly judge who is more experienced? Come on now. |
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John C.Real Estate Investor
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1. As there was no attack I have no idea why you would feel bad. I offered a view of William. 2. I said nothing about you by name or reference. If you think your post reflects badly on yourself I can not do anything about that. The order of the posts is based on time. I did not decide to follow you. It just happens if I post after you do and before anyone else happens to post. An accident of time. 3. If you have useful information to share then please speak up. Creditability in public forums comes from offering advice as and when it makes sense. I suspect you have some useful info so over to you. John Corey |
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MelCES1031
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The initial question had a concern for getting cash out with out being taxed. I have to apologize I didn't have the time to spell everything out right then so I offered some personal contact. How that makes me look bad - who knows? I do not believe so at all. There are ways. Refinancing after the purchase of the replacement property is one. I apologize for assuming that was directed at me - as John has clearly said you should consult an experienced professional of your choice. I would like to stand behind William as well as he is one of the founding members of the FEA and has numerous years of experience and undoubtedly knows exactly what he is talking about. He is highly respected in the industry and very smart. |
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Bill E.Real Estate InvestorSan Diego, California
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There are numerous tax-deferral and tax-exclusion strategies available to the investor. I have attached a copy of a newsletter that briefly summarizes some of the options that are available. It is importatnt that you meet with your legal, financial and tax advisors before structuring any tax-deferral or tax-exclusion strategy. |
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Posted: 09/17/2007 at 11:38AM
