1031 Struggle-Need some Advice

[David Weskamp]

Hello BP Team,

I am struggling to work through a potential 1031 that I thought was a no brainier.  I have been hearing this 1031 term for 20 years and thought it was such a great tool. I'm not sure that a 1031 exchange is a tool that will fit most properties and is really that useful

I have been investing in Idaho and out of state (Arkansas). I recently put a single family residence under contract in Arkansas that was contingent on selling my duplex in Idaho. This is where the 1031 comes in> 

Here is my scenario: 

Idaho

I purchased a duplex in Idaho (2019) for $135,000 at 20% down ($27,000). I currently have this property under contract for $208,000 My goal was to to 1031 exchange the capital gains into a property in Arkansas

Arkansas

I have a single family (plus detached apt) under contract for $70,000. I have sent both my PSA for Idaho and Arkansas to the 1031 escrow title company and have informed my CPA of my plans. The closing dates for both properties is August 6th.

My CPA has informed that this exchange will not really defer the taxes. I was informed that I must trade up with Like Properties. My goal was to exchange and use the capital gains to purchase the AR property free and clear. So, It appears that I must purchase/exchange a property that is equal or higher than the one i am selling. So, forced to purchase a property that might require a loan instead of being able to purchase free and clear? How do i complete this exchange and defer the taxes?

I also tried to do a reverse 1031 with two other AR properties that I purchased less than 180 days ago, but since the properties were not held with a title company after closing and until the exchange was complete, I did not qualify. (which i understand). 

Hoping that some investors may have some advice on how to complete this exchange with deferring all of the capital gains (or at least most of the gains) Is this true, that you must trade up and your exchange property must be higher value. 

Thanks,

Dave Weskamp in Picabo, Idaho