1031 exchange amount

[Tyler Cote]

Writing for some clarification on how the 1031 actually works — plan to use it for the first time in the coming weeks.

Let’s say I’m selling a property for $200k, with roughly half as proceeds and the other half going back you pay off the mortgage. I haven’t lived in the house in 2 out of last 5 years but have owned it for more than 1.

If I want to defer all taxes, I must exchange for a property worth >$200k. But, what if I decide to exchange it for a property that I buy for $120k? In other words, how do I determine what portion for the original cap gains hit I’m eligible to defer if I don’t meet or exceed the sale price of the relinquished property on the newly acquired one?

[Wayne Brooks]

@Adriana Cardenas

If it is the sale and purchase of an investment property, not a personal residence, then yes you could buy a lot and build.....but you’d still have to have the property Completed within the 180 day replacement period. And it couldn’t be on a parcel you already own.