1031 exchange and eminent domain

[Hussein Salama]

I have very recently completed a 1031 exchange. I sold a property in the Bay Area (California) and purchased five replacement properties in Florida. One week after completing the exchange Marion County, FL, contacted me regarding one of the replacement properties and notified me that it is on the path of a planned new 4-lane road and that they would like to do a whole take acquisition.

My priority is to preserve the 1031 exchange and to continue deferring the capital gain taxes (both federal and CA state). 

[Dave Foster]

@Hussein Salama,  Your 1031 is effectively over.  Your accountant has filed the 8824 with your tax return and your new depreciation tables and basis are now just part of your tax return profile.  Basically you just own a property that you acquired through a 1031.  So the basis has been adjusted.

Your options at this point with the property in general.

1. Hold.  No impact on the past 1031.

2. Sell and do not 1031 - you pay the tax that was deferred and tax on any new gain or new depreciation recapture.

3. Sell and do a 1033 exchange.  These are much more simple than a 1031 and your timeline is greatly extended.  You do not have to use someone like a QI for a 1031.  Your accountant will direct you so it gets reported correctly. - No tax