All Forum Posts by: Lori F.

I'm considering the sale of a property I acquired in 2014 through a 1031 exchange. I would be doing a straight sale, not another 1031 exchange. I'm having trouble finding a formula to help me figure out what the tax implications might be.  If anyone has a formula or spreadsheet to share, that would be much appreciated.

I guess where I'm the most confused is regarding where the deferred gain and depreciation taken on the relinquished property get figured in. Are these both already factored into the adjusted cost basis of the replacement property?

Also with the current (replacement) property, how do I factor in the depreciation taken? I know I'd pay 25% of it as recapture, but does it get added or subtracted in the formula for figuring out gain? I've tried using several online 1031 calculators but no 2 seem to be the same, and none of them deal with selling a property that was acquired through a prior 1031. 

Thanks in advance for your help!

Thanks for the response, Dave. We are past the 45 day identification period. The problem with the second property is that it needs at least $20k in repair work. The QI says no escrowed funds at closing and repairs need to be made before closing. Not all the work can be done by then. QI suggested an improvement exchange as a possibility but lender will not allow the QI to hold title to the property until repairs are made. We don't have the funds to pay for the repairs after closing, unless we take cash boot. It's a tricky situation.

I was planning to buy 2 replacement properties as part of a 1031 exchange. Now one of the replacement property purchases may fall through. 

How would taxes be computed on a partial exchange, where I would be buying down in price (by about $200k) and then either A) taking a smaller mortgage than I had on the relinquished property and using all the sales proceeds or B) taking a larger mortgage but generating cash at closing? 

I guess what I'm asking is if it's possible that I'd have to pay taxes on the price difference plus the mortgage boot plus the cash boot.

We have sold our relinquished property in Southern California and are working on the purchase of 2 replacement properties in another state.  This is our first 1031 exchange and I am confused about permissible closing costs and boot. 

1. Is it correct than any non-permissible costs paid at closing from the sales proceeds are considered boot? For example, we paid $2500 for termite work out of proceeds at closing, so is that boot?

2. If we received $30k cash boot at sale of relinquished property, but permissible closing costs were $25k, do the closing costs offset the cash boot, creating a taxable event of just the difference ($5k)?

3. Can permissible closing costs paid out of pocket offset cash boot? For example, we paid our accountant $700 for 1031 advice and wrote him a personal check.

4. Would home staging be considered a permissible closing cost?

5. How about municipal code compliance required at time of sale, like low flow toilets and emergency gas shut off valves?

6. Can permissible closing costs incurred from the sale of the CA property plus the 2 out of state replacement properties be added together to offset the cash boot taken?

7. Is net cash boot federally taxed at 25%, up to the $ amount of depreciation taken?

Thanks!