All Forum Posts by: Ron C.

Thanks very much gentleman, I think I understand now but my head hurts!  Math was never my strength.  If I am reading the responses correctly if we sold for 185 and only bought land worth say 70K a 1031 won't defer any of the recapture or capital gain.  Is that correct?  

Thanks Dave, but I am still not quite clear on how the numbers work.  Our basis in the condo is about $152000 and we have taken around $32000 in depreciation.  Our adjusted basis would then be $120000 if that is the correct terminology and my math is right.  Here is my understanding, please correct me if I am wrong.   If it sold for $185000  we would have $65000 in taxable gain.  if we cash out completely, $32000 of the gain would be taxed at the recapture rate of 25% and the remaining $33000 as long term capital gain, at 15% for us as our income is well below the higher rate.  If these numbers are correct I am trying to figure out how a partial exchange is taxed.  My understanding is that if we bought vacant land they collect all of the recapture tax, no matter the price as it is non depreciable.  That would leave only the capital gain portion that can be deferred.  If we bought land for $60000, my understanding is we would still have to pay full capital gains on the $33000 in addition to the $32000 taxed as recapture because the exchange price is still less than our total capital gain of $65000.   I have researched a lot but still don't fully understand how the partial exchange is taxed.  Thanks for any help, hope I made sense with the above. 

Capital not Capitol.......$#%^ spell check!!!

I have done a lot of google searches and how I came to this web site.  Some answers but still confused.  Here is my situation:

We own a rental condo that has been in full time rental for a number of years and took depreciation.  Paid cash for it when purchased no mortgage.  We are considering a 1031 exchange to buy some vacant land around our home that could be developed.  The land would probably be at least $100K less than what we sell the condo for and less than what we paid for the condo. From my understanding, the IRS will collect the recapture tax since the exchange is from a depreciated asset to a non depreciable one, so I can't defer recapture.  That would leave only the balance taxed as a capital gain to defer, but since the replacement property is less than our original capital investment (purchase price?) they will also fully collect the capitol gains.  I am right on this analysis or what am I missing?  Thanks, learned a lot here.