1031 exchange question

[Mark Harrison]

I am new to 1031 exchanges. Are the proceeds that are required to be held in a trust after the property is sold equal the sale price less the existing mortgage balance? Or is only capital gain required to be held in the trust? These are round numbers that relate to my specific situation.

2014 purchase price: $200,000

Improvements to the property: $50,000

Adjusted Cost Basis: $250,000

Future Sale Price: $320,000

Capital Gain: $70,000 ($320,000 - $250,000)

Mortgage at time of Sale: $180,000 Would the proceeds after the sale equal $140,000 ($320,000 sale price - $180,000 mortgage balance) or is the $70,000 capital gain considered the proceeds? I would ideally like to finance a replacement property with 80% debt and 20% equity. However, if I bought a $350,000 replacement property and had to invest $140,000, this would result in only being able to leverage 60% of the new property.