In need of help with 1031 Exchange

[Luis Escobar]

Hi BP community. I am in need of help. I was in the process of purchasing portfolio of properties and in the due diligence period I got access to financial reports and after further analyzing performance of properties I am having doubts. Properties are located primarily in C class neighborhoods and an average of 30k. I have read a lot cautioning investors to do this as it often results in higher cost of repairs and vacancies. In reviewing financial statements I see that same trend. I am still in the process of getting more information but I am now concerned that if this fall through that I will not be able to complete a 1031 exchange that defers all of the taxes. Here is my scenario and questions about 1031 exchange:

Original purchase price = 240k (owed about 209k when sold)

Sold property for = 438K

After subtracting fees my understanding was I needed to find replacement property valued at 415k

Funds I have in 1031 exchange account is 208k

My understanding is that to fully avoid capital gains tax I need to reinvest all 208K plus find properties valued at a total of 415k. Is that rightt? If so, then my questions are the following:

• What if I do not buy anything? Does that mean we pay taxes on the 208k profit? Or on the 415k total sales price minus selling fees?
• If I purchase property for 130k to do a partial exchange would I be taxed on 208k-130k? Or would the tax apply to 415k – 130k?

Insight on this would be much appreciated. Thanks!