1031 exchange how much do I have to reinvest to avoid being taxed

[J Chouinard]

Just sold some commercial properties and we are doing 1031 exchange. My intermediary told me that we need to purchase properties valuing the total of the ones sold. I was doing some research and I am seeing conflicting info. Some of the info says you only have to reinvest the net profit, meaning I don't have to include closing costs from my sale. That will make a big difference in the cash I will have to shell out! Anyone have any insight? 

[Dave Foster]

@J Chouinard, I hope your QI meant "net sale".  If not you're in trouble with them.  

In order to completely defer all tax you must purchase ( purchase is also net of closing costs on the purchase) at least as much as your net sale (contract price minus closing costs/commissions but not mortgage).  Second you must use all of the net proceeds in the replacement purchases (the net sale minus any mortgage payoff).  As long as you do those two things you'll avoid all tax.

If you purchase less than your net sale or if you take some cash out of the sale you will pay tax on that amount but it will not jeopardize the rest of your 1031.