1031 Exchange Question

[Jeff Vierra]

Greetings, 

My brothers and I inherited an 8 unit complex in CA.  We area all on the title individually and not in a formal partnership agreement.  It is appraised at 2 million our cost basis is 1.5 million.  Lets say it sells at the appraised value... 

If I do a 1031 exchange, would my next purchase be based on the cap gains hit of $133,333 or do I have to take all of my portion and invest it in the 1031 which would be $633,333?

Thank you,

[Dave Foster]

@Jeff Vierra, or something in the middle.  If you purchase at least that 1/3rd of $625K ish you'll avoid all tax.  But you also might take out some cash and invest the rest.  Called a partial exchange.  You can purchase less than you sell.  and you can take cash out of a transaction.  You pay tax on the difference but shelter the remaining gain and tax in the 1031.  

You may decide to carve out some cash to pay a bill or treat yourself or honor the gift.  Take out that much plus enough to cover the tax hit and put the rest into a 1031.