I’m going to list one of my rentals for sale in about a month when the tenant moves out. I will probably net about 60K from the sale (after all transaction fees). My goal is to use about half of this net profit (30K) and re-invest into a new rental house (20% down on a ~100Kish house) to keep myself “in the game” and avoid being fully taxed for long term capital gains. i know very little about 1031 What QI have you used? What were the fees and stipulations? I’m in North Carolina if that matters.

Talk to our friend @Dave Foster. The way you discribing the transaction is not how 1031 works. You can certainly structure a transaction to get out with 30k cash after the exchange if you choose your property correctly, but you will be fully taxed on this amount. Any cash you received(up to your deferred gain) in 1031 is taxed, and does not qualifiy for the deferral.

I've done a few Exchanges and always used a Title Company. However, I think @Dave Foster is the BP go-to-guy to get the best overall advice from.

@Keith Nelson What do you plan on doing with the other 30k? The QI's location does not matter. You will see @Dave Foster activley posting on BP. Other QI's can be found at 1031.org - website for the Federation of Exchange Accommodators.

This is exactly what I thought when I said the way you describing the transaction is not how it works. And it’s normal, it’s a confusion topic. REQUIREMENTS FOR DEFERRAL OF GAIN UNDER SECTION 1031

@Ashish Acharya yes, I understand the other 30K will Be taxed to the full long term capital gains amount. I just want to keep the other (taxed) 30K as cash to have for reserves and whatever else.

@Ashish Acharya Thanks for the advice, however I want to make sure I fully underatand..... SO If I did a 1031 exchange to re-invest half ($30K) of net proceeds to a "like property", then took the other $30K and stuck in in my bank account as "extra cash"... I would still only be taxed on capital gains for the $30K "extra cash" and not the $30K which was re-invested (following 1031 rules) into a "like property"? Is this correct?

Bill Exeter at Exeter 1031 is also a good one. Make sure whatever company holding your funds is properly insured, has the adequate experience level, etc.

Which qualified intermediary to use for 1031 exchange?Which qualified intermediary to use for 1031 exchange?

@Keith N., One of the most important roles the QI will fill is to guide you through the process so you avoid those unintentional but costly "whoops" moments. Especially if you're not experienced in the world, application, and strategy of 1031 you want to find a full service QI that you jell with and who acts in a much larger capacity than just a form filer.

Speaking of "whoops" moments, I see where you're trying to get to - it's time to pull some chips off the table and enjoy profits while still "staying on the ride somewhat for a bit. Unfortunately @Ashish Acharya and I are seeing the same difficulty with your scenario. In order to defer all tax you must purchase at least as much as your net sale (the $60K after closing costs) and use all of the net proceeds (I'm guessing there was no debt on that property so net sale and net proceeds are the same).

You can purchase less than you sell and you can take cash out but you'll pay tax on the difference as if taking profit out. The problem is that the IRS simply says that the first dollar out is a dollar of profit no matter what you call it :( . So selling for $60K and only buying with $30K of the cash (even if you bought $60K total) would leave you paying tax on the $30K in cash. So you'd pay tax on that difference and that means essentially no savings from doing the 1031.

If you want to cash out some fun money the answer is to do a complete 1031. Use all $60K of cash and buy at least $60K of investment real estate. Then after the fact when the 1031 is over refinance that property and take the cash out. Now you can use it anyway you want. It is not taxable because it's not part of the 1031. And the tenant is going to be paying the mortgage.

Which qualified intermediary to use for 1031 exchange?

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