1031 exchange just profits or all proceeds

[Paul D.]

I bought a house for 60k and am selling this month net me 80k and want to do a 1031 exchange. Do I have to escrow the 20k profit only or the whole 80k proceeds from the sell? Do I have to buy a property to defer taxes for 80k or more or just 20k?

I buy and hold and never have had to deal with selling a house and deferring taxes.

[Dave Foster]

@Paul D.,  Simply looking at the length of time you held a property does not definitely tell you whether or not your property qualifies for 1031 treatment. It is actually being able to demonstrate your intent.  There is no statutory holding period.  You must have purchased it to hold for productive use in business trade or for investment.  I read all of your posts and gleaned the following from them.

1. Your past and present practice is to buy and hold.

2. You bought this property with the intent of holding

3. You had an offer that you couldn't resist (if you bought it to hold then it probably wasn't actively for sale so you got an unsolicited offer - good thing).

My guess is you have other documentation such as rental advertisements, emails with partners, cpas, potential tenants, etc.

All that indicates that you may have indeed bought the property with the intent to hold and now need to change your intent due to external factors.  That would qualify that property for 1031. Circumstances can always change.  Just remember that an accident that happens is just that.  But an accident that happens several times a year probably isn't an accident.  

Yes you can sell one and buy two using the 1031.  The other question though is savings.  I don't think TN has a state tax soIt sounds like you'll have ordinary income tax fed but really not much depreciation.  So you're exposure is probably around $2500 - $3000 in total tax.  An average exchange will run you $750 so there's some savings but whether or not it is worth it to you is is up to you.

No matter how you own the house or how much equity you have in it, you must meet two criteria in order to fully defer all tax.  You must purchase at least as much as you sell (your net sales price after closing costs but before mortgage pay off) and you must use all of the proceeds from the sale (net cash after loan payoff),  You can buy less or take cash out but you will pay tax on the difference.