Hypothetical 1031 Exchange: Acquired Property$<Disposed Property$

[Jesse Weaver]

I have a situation where I'll be selling a property that has a greater value than I'll be able to replace it with in smaller properties.  It's my understanding that a portion of my gain that I'm able to reinvest within the 1031 Exchange rules will be qualified for tax deferral purposes.  However, I'm unsure as to how to estimate what that looks like, so I've provided a completely hypothetical example below and hope this amazing community would have some insights into what the tax liability on this example would look like.  As always, I really appreciate your help!  

Example:

- Example: $50K gain after transaction expenses are paid ($25K Recapture and $25K capital gain)

- Disposed Property: Net sold value of $300K (after transaction expenses)

- Originally Purchased for $275K

- Depreciated book value of $250K

- Acquired Property: Purchase price of $200K

- What would the estimated tax liability be on this transaction assuming an ordinary income tax rate of 25% and capital gains tax rate of 15% if using a 1031 Exchange?

- What would the estimated tax liability be if the 1031 Exchange was not used but assuming the same tax rates as above?

[Wayne Brooks]

@Bill Exeter?  I believe your entire gain 25k recapture and 25k cap gain are fully taxable, since you're $100k "short" on replacement verses the sold asset.  Would be same if you were $50k short, or did no exchange at all.