1031 - HELP - I'm so confused

Member since 2020 · 12 posts · 3 votes

As the title says, I'm SO confused. I'll get right to the point:
I'm not sure how much I need to reinvest to do a 1031 and how much of a purchase price I need to purchase at. Everything I read says I have to purchase a property of the same value as the one I'm selling, but other things say it's just the same value of the gains.

Here are the details:
I'm going through a divorce and am forced to sell a property that isn't exempt from gains.

Sale Price: $525k
Purchase Price: $325k
Mortgage Left: $268000
Estimated Gains: 224k
My portion of the gains (after 50/50 split with wife): $112,000

Questions
-Do I have to purchase a home of $525k with my $112k or simply a home of $112k or higher?

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Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

If you sell for $525k and it costs you $35k in “selling costs” (commissions, title insurance, concessions, etc.) then you need to buy $490k. If you sell for $560k and net $525 after those costs, you have to spend $525k.

You must reinvest all “cash” $525k (if that’s net) minus $268k mortgage is $257k.

You must buy in the same “tax name” as you sell if you’re married filing jointly I’m pretty sure you can’t do a 1031 on just “your half”

Ps. Your “gain” isn’t $224k. It’s selling price $525k, minus buying price $325k, or $200k. Even less if you have selling costs.

Talk to the expert @Dave Foster if you need further clarification

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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
2y
If you sell for $525k and it costs you $35k in “selling costs” (commissions, title insurance, concessions, etc.) then you need to buy $490k. If you sell for $560k and net $525 after those costs, you have to spend $525k.

You must reinvest all “cash” $525k (if that’s net) minus $268k mortgage is $257k.

You must buy in the same “tax name” as you sell if you’re married filing jointly I’m pretty sure you can’t do a 1031 on just “your half”

Ps. Your “gain” isn’t $224k. It’s selling price $525k, minus buying price $325k, or $200k. Even less if you have selling costs.

Talk to the expert @Dave Foster if you need further clarification

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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
2y
@Daniel Pitner, I appreciate @Bill B.s shout out. And he gave you a great synopsis. I see you just booked a call with me. We'll go over your specifics offline in the call.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
Quote from @Daniel Pitner:

As the title says, I'm SO confused. I'll get right to the point:
I'm not sure how much I need to reinvest to do a 1031 and how much of a purchase price I need to purchase at. Everything I read says I have to purchase a property of the same value as the one I'm selling, but other things say it's just the same value of the gains.

Here are the details:
I'm going through a divorce and am forced to sell a property that isn't exempt from gains.

Sale Price: $525k
Purchase Price: $325k
Mortgage Left: $268000
Estimated Gains: 224k
My portion of the gains (after 50/50 split with wife): $112,000

Questions
-Do I have to purchase a home of $525k with my $112k or simply a home of $112k or higher?

I would ask the question - is a 1031 even worth considering at this point in time? Do you even have a property picked out? I would not force myself into a 1031.
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Daniel Pitner
OP
Member since 2020 · 12 posts · 3 votes
2y
@Dave Foster was a HUGE help with this. Thanks everyone!
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