1031 Exchange Information

[Matt Heath]

Hello Everyone, 

I am looking for some general information on 1031 Exchanges. I have read the guidelines on the IRS website, but wanted to confirm some information. Lets say for example I own a property worth 250K, but have a remaining loan balance of 50K. I sell the property netting me 200K. I would like to take the profits and 1031 Exchange them to use as a down payment into a larger deal worth 1,000,000.  Is it possible to do this? I have read that you can only buy a property worth 200% of your original property. Assuming this is correct, I could only buy a property worth 500K. I can however buy multiple properties as long as they do not exceed 500K? 

Thank you for all of your responses in advance.

Sincerely,

Matt

[Bill Exeter]

Hi @Shawn Jacobs, 

Thank you so much for the shout out. It is much appreciated, and we look forward to working with you in the next few months.

Hi @Alexander Hamilton, 

You indicated that you are selling your primary residence. The sale of a primary residence falls under Section 121 of the Internal Revenue Code ("121 Exclusion close"). The 121 Exclusion allows you to exclude up to $250,000.00 in taxable gain per person ($500,000.00 for a married couple) as long as you can say that you have owned and lived in the property as your primary residence for a total of 24 months out of the last 60 months.

1031 Exchange transactions would only apply to property that was acquired and held as rental, investment or business use property. Property acquired for personal use such as a primary residence, second home or vacation home generally will not qualify for 1031 Exchange treatment unless changes are made to both your intent and the treatment of the property. 

@Andrew Severino, 

Andrew is right on the money. You can do what we referred to as a partial 1031 Exchange transaction whereby you either trade down in value and/or pull cash out of the transaction. You would only pay taxes on the amount that you trade down by and/or the amount of cash that you pull out of the transaction. Partial transactions are structured on purpose for many strategic reasons.