1031 exchange question

[Adam Boertje]

I recently closed on my first SFH rental with tenants moving in. I also own a 156 acre ranch that I’ve rehabbed the house and I’m thinking about selling. If I sell that, is it just the profits that are subject to being taxed or the entire amount? I put 50k down on it 3 years ago and I expect to make about the same, giving me around $100k to reinvest. My 2nd question is can I just put that towards the loan I just took out, or will it need to be applied to a different property to avoid being taxed? TIA

[Chaz Mathias]

Hi Adam, It is just the capital gains that are liable to be taxes, which would be the $50k of appreciation. My understanding is that it would have to be a new property, there are rules about identifying a property and timelines to close. Here is an article that may help.

https://www.cwscapital.com/what-is-a-1031-exchange/