Need clarification on a 1031 exchange term

[Lisa R.]

Hello – I am considering doing  a 1031 exchange on a property I own. I am trying to reduce the boot as much as possible.  I understand that when you purchase the replacement property, any difference between the value of your current property and the one being replaced will be taxed. If I am wording this incorrectly – you know what I mean :)

This is my question: when they consider the ‘value’ of my current property, does that mean what my current property is ‘worth’?  Or the amount that I am selling it for?

The reason I ask is because I am selling it for less than the market value. So I am assuming they will take the current fair market value of the property? 
I cannot thank anyone enough who chooses to answer this for me! I cannot find it anywhere online. Common sense tells me it is the market value of the property but I’m just not sure… 

Thank you so much!! 
Lisa 

[Randy Rodenhouse]

The realized amount for the property sold (property relinquished) is calculated by taking the price you sell it at minus any costs to close. Let's assume the previous property sells for $550,000 with final costs of $50,000. Thus, $500,000 is the realized amount.  Calculating the basis for the new (replacement) property in a 1031 exchange is simpler--the purchase price plus the commission paid. The basis for the new asset must be equal to or greater than the relinquished asset for a successful 1031 exchange.