How do I treat the income I make monthly off of properties purchased with a 1031?

[Alex Deal]

In the future, if I sell a property and buy the next one using a 1031 exchange, are there any restrictions on what I can do with the monthly rent I make on that property, or can I treat the income just like I would if I bought the property in the traditional way?

[Dave Foster]

@Alex Deal, Its just regular income.  The form 8824 your accountant files to report the 1031 will move the basis of your old property into your new property.  So the gain (and deferred tax) are rolled forward).  And just waits until your next sale.  

One other thing that people often don't know is that you can also refinance that property anytime you want.  Some times folks will hesitate to do a 1031 because they want or need cash from their sale.  It is perfectly fine to complete your 1031.  and immediately after, do a cash out refinance.  The refinance is not taxable.  But it does put cash in your pocket while keeping the tax from your sale deferred.  And best of all - the tenant in paying the mortgage :)