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Updated over 5 years ago,

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Jonathan Chavez
  • Culver City, CA
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Tax advice | To 1031 exchange to not...

Jonathan Chavez
  • Culver City, CA
Posted

Hello, fellow bigger pocketers. I'm trying to weigh out my options on whether or not to do a 1031 exchange on the planned sale of a duplex I am about to list. I estimate that we will be on the hook for approx $100K in capital gains tax (Federal and CA) if we cash out.  I figure I could roll that into another income prop and I would essentially be using that $100K as a tax-free loan as it would be $100K less than I would need to finance. 

At the same time, I am being told by a family member that the capital gains tax has a high likelihood of increasing in the next 4-10 years depending on the party that is in the white house... He says I should pay the tax now as he thinks my tax bill will get higher if I choose to cash out later. 

I figure the "interest-free" loan on the $100K that I will not pay now along with the re-set of my depreciation recapture bill should offset the risk of a slightly higher tax bill if I decide to sell and cash out in the next 10 years? 

Is my logic off?

I'm not looking to make this a political question but I'm wondering if anyone here is taking this into consideration with their investment strategies.

Thanks-

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