1031 Exchange Requirement

[Johnny Situ]

Hi BP folks,

I have a question for 1031 exchange, here's a scenario:

Relinquished property sales price: $180,000, remaining loan balance $102,000.

Replacement properties (3 properties):

Property A: $80,000

Property B: $85,000

Property C: $138,500

Each of the above replacement properties has 20% down mortgage.

Although I have met the requirements of the total purchase price has to be equal to or greater than the selling price, these are my questions:

1. Do I need to keep the same level of total equity in the replacement properties as it was in the relinquished property ($180,000 - $102,000 = $78,000)

2. How much do I require to spend on the replacement property from the total sales proceeds, considering it would be around $60,000 after agent commission and closing costs?

[Wayne Brooks]

Two rules:

1) replacement properties must cost as much as relinquished properties, which you meet

2) ALL of your cash proceeds from the sale must be reinvested to avoid any tax....you can add some cash to the deal but you can’t keep any of it.