• when property is transferred by lease, unless the lease is for a term of years re newable forever. e. Some people don't want to buy more real estate and are ready to move on to another asset class. For quick reference purposes, below is a conversion table that you can use to convert from hours to days. Having exchanged your $800,000 property for a $700,000 asset, cash boot of $100,000 is realized. Find a buyer for the property you wish to sell. Jeffp@cpec1031. Considering that long-term capital gains taxes are either 15 or 20 percent, and short-term capital gains rates range from. Like-Kind Property: Any two assets or properties that are considered to be the same type, making an exchange between them tax free . Under IRC Section 1031, an exchanger or taxpayer executing a delayed exchange has 45 calendar days from the closing date of the sale of their relinquished property to formally identify a replacement property or properties. Income-tax law requires the assessee to get his books of accounts audited in pursuance of the requirement under Section 44AB of The Income Tax Act, 1961. When you can defer capital gains taxes, it allows you to grow. PPMO formula for Price Adjustment use NRB index of labor, material and equipment or fuel. Additionally, A determines that the total depreciation allowed or allowable on the section 1245 property is $50,000. The realized and recognized gain might seem similar at first, but those are different when it comes to taxation. Although billions of dollars worth of commercial real estate has traded hands through the 1031 exchange process, some. how we make money. This exchange allows you to defer capital gains taxes by permitting funds from selling one investment property to be exchanged for another. e1031xchange did a fantastic job from start to finish. A portion of the proceeds (the “boot”) is received in cash. Still $200,000 can be deferred, i. While engaging in a 1031 exchange with a family member is possible, it should be approached with caution. Colorful, interactive, simply The Best Financial Calculators! This 1031 Exchange calculator will estimate the taxable impact of your proposed sale and purchase. These sections provide that taxpayers in a 1031 Exchange that sell California Property and purchase NON-California Replacement Property will be required to file an annual information return with the. "A 1031 Exchange is a real estate transaction that allows real estate investors to defer capital gains taxes on the profitable sale of an investment property. 1031 Exchange Companies, also known as Qualified Intermediaries (QIs), are entities that facilitate property transactions under Section 1031 of the IRS tax code, allowing real estate investors to defer capital gains taxes. Net amount for Reinvestment. The purpose of this article is to provide an overview of some of the most fundamental 1031 exchange rules and concepts, written in a way that doesn't require. Conclusion. 1031 exchange commonly refers to an exchange under Section 1031 of the Internal Revenue Code as a “like-kind exchange. 1031 Exchange Calculator. This taxpayer fully depreciated the five-year property components by the time the exchange occurs. This then leaves you with a recognized gain of $50,000. The IRS's strict timing rules can make a 1031 exchange for new construction a risky venture. The 1031 exchange can then only be applied to the investment portion of the property. 1031 Exchange. For instance, if you have a property with a combined land and structure cost basis of $150,000. 1 CNY = 0. Could I rent it out for a year and then do a combination of a 1031 exchange. The tax assessment says that 30% of the property value is the land and the other 70% is the building. A 1031 exchange must be completed within a 180-day period. ”. It allows savvy real estate investors to identify an unlimited number of replacement properties as long as their total cost doesn’t exceed double the value of the original property. It does not apply to personal property, but it can apply to residential property, such as multi-family homes and apartment complexes. 1031 provides for deferral of capital gains on the exchange of property held for productive use in a trade or business, or for investment, for replacement property that is also held for productive use in a trade or business or for investment purposes (Regs. 1031 exchange is purchased for $1,500,000. When an investment property is sold, the proceeds are transferred directly to the QI, which holds the funds in a secure. 8 NIIT for a total of $9,690. TAXES DUE (Effective Tax Rate)4. , a 1031 exchange) allows investors to exchange investment properties for “ like-kind ” assets to be held for productive use in a trade or business or for investment purposes. You target a replacement property and can roll over $100,000 of the $150,000 gain into it. Apportionment generally refers to the division of business income among states by the use of an apportionment formula. When it comes to buying and selling real estate, timing is everything. Reverse 1031 exchange. SEE OUR COMPANY FACT SHEET. com. This is similar to the like-kind provision under Section 1031, but no where near as liberal. Boot received is the money or the fair market value of “other property” received by the taxpayer in an exchange. A partial exchange allows you to retain. Mortgage boot in a partial 1031 exchange Mortgage boot is incurred when you fail to replace the value of the mortgage relief generated from the sale of the sold property. Under the Three Property Rule the exchanger may identify up to three properties, regardless of value, as long as. The 1031 Exchange Equation. 1031 Learn with flashcards, games, and more — for free. Pro | May 11 2013, 17:41 | 1031 Exchanges. This section states that if an individual exchanges one investment property for another via a 1031 exchange, they may be able to defer capital gains (or losses) that they would otherwise have to pay at the time of sale. S. But of course, these rules aren’t mandated. Contact our 1031 exchange professionals today to discuss the details of your exchange. IRS Regulations changed effective January 1st, 2018. Here's some estimated numbers from 2006 (from Form 8824): FMV of condo: $196000. ”. If the valuation of the replacement property is lower, an investor can settle the 1031 exchange by paying the difference between the properties' prices. " Internal Revenue Code Section 1031 (i. Another 1031 exchange can be used to defer the gain and recaptured on the. The realized and recognized gain might seem similar at first, but those are different when it comes to taxation. Treas. The exchange facilitator can be a qualified intermediary or another person who holds exchange funds for you as part of an escrow, or exchange agreement. In addition to years of experience, Asher holds the 1031 Exchange industry’s Certified Exchange Specialist (CES®) designation from the Federation of Exchange Accommodators. 4) You want to simplify your life. Section 121: Tax exclusion applies to a primary residence where the property has been used as a main residence for at least two of the past five years. Buyer agrees to an assignment of this contract to. The rules and timelines for completing a 1031 Exchange are outlined in. Original purchase price ($): Capital improvements ($): Accumulated depreciation ($): Sales price ($): Selling expenses ($): Rates & Loan Balance Input Federal capital gains rate (%): State capital gains rate. , in the form of an audit report at the e-filing portal of Income-tax in Form No. A Guide to 1031 Exchanges. In order for a property to qualify as like-kind, they must hold it for investment or. Completing a 1031 exchange in Florida requires adhering to specific time limits and identification rules. Using the previous example, assume the company owes $350 in brokerage fees besides the expense of the asset's basis of $2,500. Our intermediaries help clients throughout the state of Minnesota and around the country. Also, because your total income was above $200,000, the entire gain of $255,000 is subject to the 3. Jean Bolger. However, there are times when you may want to hold back part of the sales proceeds and use the money for another purpose. Effective January 1, 2018, IRC §1031 applies only to real estate assets. If you do, the IRS may choose to challenge it. Don’t Get the Boot! Investors need to understand what is cash boot in a 1031 Exchange so they can avoid uncessary tax consequences. IRC Section 1031 (a) (1) states as under : “No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment, if such real property is exchanged solely for real property of like-kind which is to be held either for productive use in a trade or business or for investment. With a 1031 Exchange, you can defer, reduce, and even eliminate paying taxes. Capital Gains Tax. I have a question. You choose to sell your current property with a $150,000 mortgage on it. Here’s the formula in code format: 1031 Exchange Value = Property Value - Exchange. Like-Kind Exchange: A tax deferred exchange that allows for the disposal of an asset and the acquisition of another similar asset without generating a tax liability from the sale of the first. ”. The new property that is received in the Sec. ; Therefore, you recognize a gain of $25,000 − $20,000 = $5000. The 1031 exchange 200% Rule is an important rule for investors who want to defer paying taxes on the sale of an investment property. Do know that 1031 exchanges aren’t just for investment real estate. See here for more details. Top 10 Reasons Real Estate Investors Are Jumping into DSTs. They’re now selling it for $1 million. Deferred exchanges are more complex but allow flexibility. Calculate the Final Basis in the 1031 Exchange. Internal Revenue Code (IRC). A 1031 exchange comes from Section 1031 of the U. Example: 1031 exchange that converts a primary residence to a rental property. C § 1031), and it allows real estate investors to make the most out of their investments by exchanging one investment property for another similar property. Image: A quick flowchart showing how a 1031 exchange works. S. The 1031 IRS Code. The “1031” refers to the section of the Internal Revenue Code that permits such exchanges. A 1031 exchange allows an investor to sell a property and roll the proceeds from the sale into another “like-kind” asset of greater value. 310. 3. They allow you to dispose of property and subsequently acquire one or more other like-kind replacement properties. With over 10 years of experience in the 1031 industry, Asher has extensive knowledge of all facets of 1031 Exchanges. A 1031 exchange of multiple properties or assets occurs if there is one or more relinquished properties being sold and transferred and/or one or more like-kind replacement properties being identified and acquired. (877) 797-1031. Regs. It allows you to replace one investment or business property with a like-kind property and defer the capital gains on the sale if Internal Revenue Service (IRS) rules are meticulously followed. Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Key Takeaways. API’s national headquarters is in Roseville, CA. 1245(b)(4) recapture. 1031 EThe term “1031 exchange” refers to Section 1031 of the Internal Revenue Code and is also called a “like-kind” exchange of property. Pulling money out tax free prior to the exchange would contradict this point. With the passage of the Tax Cuts & Jobs Act, only real property can now be exchanged for other like-kind real property. You complete the exchange by purchasing a $500,000 property with a mortgage of $350,000. 3%. Code § 1031 – “Exchange of Real Property Held for Productive Use or Investment” – has several must-adhere-to rules to ensure a valid transaction and to avoid an unanticipated tax bill. 400 W. Requires only 10 inputs into a simple Excel spreadsheet. A like-kind exchange can involve the exchange of one business. At the heart of the 1031 exchange is the 1031 exchange timeline, which dictates how a 1031 exchange is performed. 20. Adjusted basis of like-kind property surrendered. While this might seem straightforward, this assumption might be misleading as. Section 1031: A section of the U. Exeter 1031 Exchange Services, LLC 402 West Broadway, Suite 400, San Diego, California 92101 Office: (619) 239 -3091 • Facsimile: (866) 393-8371 • Web site: Suppose you are a real estate investor. If you want to take some cash out of your relinquished property, you don’t have to roll over the entire sales proceeds into a like-kind. Understand the process, tradeoffs, and how to determine if it is a good fit for your financial goals. Learn how to complete a partial 1031 exchange. Section 1031 of the Internal Revenue Code (To IRS. 1031 Exchange. 5MM in net sale proceeds. Defer the tax. When you do a 1031 exchange you need to acquire a replacement property that's like-kind. Your exchange agreement specifies only 90% of the rental proceeds are to be included in the exchange. If you're like a lot of real estate investors you are real estate rich and cash poor. The 1031 exchange equation shows how the taxpayer can quickly calculate whether there will be recognized gain based on the following principals. The basic rule of a 1031 exchange is that taxpayers can defer taxes on the sale of property by reinvesting those proceeds from the sale into a like-kind. Both properties must be similar enough to qualify as "like-kind. If the names on the sale property and the exchange property are different, it won’t be accepted. 612. Potential Risks of 1031 Exchange for New Construction Time Constraints. QUALIFYING PROPERTIES: A key rule about 1031 exchanges is that the transaction must take the form of an “exchange” with “like-kind” properties, rather than just a sale or one property. Beginning after 2017, nontaxable like-kind exchange treatment under section 1031 applies only to exchanges of real property held for use in a trade or business or for investment, other than real property. A partial exchange allows you. The extensions permit eligible persons who began an IRC §1031 exchange between July 12, 2022 and January 8, 2023, to extend the 180-day exchange period to the later of October 16, 2023 or 120. This article acts as a brief guide to investing in commercial real estate and how the 1031 exchange can help you invest successfully. Under the Tax Cuts and Jobs Act, Section 1031 now applies only to exchanges of real property and not to exchanges of personal or intangible property. Treas. 15th Street Suite 700. In California, a §1031 exchange allows you, as a real estate investor, to defer the federal and state income tax that would normally be incurred from selling real property, by using the proceeds of the sale to immediately purchase another ‘like-kind’ property. The general basis concept is that the new. Propan-1-ol is the parent member of the class of propan-1-ols that is propane in which a hydrogen of one of the methyl groups is replaced by a hydroxy group. Realty Exchange Corporation has created this simple Capital Gains Calculator and Analysis Form to estimate the tax impact if a property is sold and. . It sells for $650,000. If you do, the IRS may choose to challenge it. Doing so is known as a like-kind exchange, which allows taxpayers to grow their investment on a tax-deferred basis. If you sold an investment property for $1 million but identified a replacement property that was only worth $800,000, you could keep the. My parents have a trust setup with both of them as managing members. It states that none of the realized gain or loss will be recognized at the time of the exchange. 1 Like-kind exchanges accounted for approximately 10 to 20 percent of all real estate transactions in that time frame. There are two ways to depreciate real estate post 1031 Exchange. When 1031 Exchanges originated over 100 years ago, it was necessary for the Seller and Buyer to literally exchange the two associated properties - a lot has changed since that time. Make the Most of 1031 Exchange Opportunities. The only requirement is that a person must buy “like-kind” property of equal or greater value with the sale’s profits. 1031 exchange benefits. ”. Get Your Copy. The tax on the replacement property is calculated on the basis of the purchase price of the replacement property minus the gain, which was deferred on the sale of the relinquished property as a result of the exchange. 1031(a)-3 of the regulations, A determines that the section 1245 assets are real property for section 1031 like-kind exchange treatment. Call them today! 503-635-1031. Deferred Income Tax Liability. A 1031 exchange allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale within certain time limits in a real estate property or properties of “like-kind” and equal or greater value. You must complete the purchase of a new property or properties within 180 calendar days from the time you sell. No Texas law restricts or governs the like-kind exchange. Washington property owners can pay up to 28. Internal Revenue Code, is an investment strategy that allows an investor to defer capital gains tax when selling an investment property, provided they reinvest the proceeds into a "like-kind" property. Requires only 10 inputs into a simple Excel spreadsheet. Get Your Copy. An Example would be a 100-acre farm. ”. 86 % during June 2015 to June 2019. As the name suggests, a reverse 1031 tax-deferred exchange follows the opposite process that a delayed 1031 exchange does. They can use the proceeds of the sale to invest in another multifamily asset of. A 1031 exchange can help you defer capital gains taxes on investment property, but the rules are complicated. 800-795-0769 -Ed Horan, CES® is Senior Exchange Consultant for Realty Exchange Corporation, Gainesville, VA, and author of How to Do a Like Kind Exchange Using a Qualified Intermediary. For example, let’s say that a QI did $240 million of exchanges in each of the last two years. A enters $40,000 on line 20, the smaller of line 15 or line 19. This starts from the date of the sale of the relinquished property. In the first scenario described above, the married couple is able to take their $1. a Two of these statements are correct. Named after section 1031 of the IRS code, it allows you to sell an investment and buy. The law allows businesses to sell real property and then postpone paying tax on the gain if they invest the proceeds in another similar property. Which of the following statements is correct? -The receipt of boot in a § 1031 likekind exchange can result in the recognition of gain. One option to consider is to complete your exchange by re-investing ALL of your equity (1031 funds) into a replacement property of equal or greater value; and then later in a subsequent (separate post. Assume you have a prize steer that you sell in a 1031 Exchange for $20,000 and you buy a new steer for $20,000. Tax Liability: A tax liability is the amount of taxation that a business or an individual incurs based on current tax laws. They’re looking at $900,000 of capital gains — well over the $500,000 exclusion for couples. Commercial property is depreciated over 39 years. About The 1031 Exchange Calculator. A loan’s term is the amount of time that the borrower has to repay the principal balance. 25 * total deferred gains of $500,000 = $125,000. For the purposes of a 1031 exchange, “you” can certainly be an individual investor. To pay no tax when executing a 1031 Exchange, you must purchase at least. The $1MM in equity on this deal is less than the $1. Reg. One crucial aspect of a successful 1031 exchange is calculating the exchange basis accurately. Task: Convert 180 hours to days (show work) Formula: hours ÷ 24 = days Calculations: 180 hours ÷ 24 = 7. The total gains deferred of $500,000 must be split proportionately between the two replacement properties Y and Z to determine what amount is taken from each property’s acquisition cost to come up with the new cost basis for each property. Computing Gain For Multi-Property 1031 Exchange. Many factors are involved in calculating taxes, including factors. Add these numbers together and you have determined the tax due. This might be obvious, but it’s worth noting: in a 1031 exchange, both the property being sold/exchanged and the property being bought need to be purchased by the same party. Key Takeaways. The first step in this process is for the seller who intends to perform a 1031 exchange to sell their property. Our primary office is located in downtown Minneapolis, but we work with clients throughout the country. These final regulations address the definition of real property under section 1031 and also provide a rule addressing the receipt of personal property that is incidental to. It sells for $650,000. S. Yes, a Qualified Intermediary (QI) is typically used to facilitate a 1031 Exchange . (TCO 11) If boot is received in a § 1031 like-kind exchange and gain is recognized, then which formula correctly calculates the basis for the like-kind property received? (Points : 2) Adjusted basis of like-kind property surrendered + gain recognized - fair market value of boot received Fair market value of like-kind property. The 1031 exchange refers to the use of section 1031 of the United States Internal Revenue Code (26 U. It is possible to have little or no equity or profit upon a sale and still owe capital gains taxes. If you’re working with a qualified intermediary,. 1031-exchange. Let’s go through an example. Example: Calculating Gain and Basis for an Exchange Like-Kind Property. S. Step 2 Sell Existing Property. 25. The IRS defines like-kind properties as having the same nature or character, even if they differ in grade or. Because any money you receive from selling a property is taxable, you technically can’t receive that money when you sell your property. Multiple property involvement ramps up complexity to the next level. The total gains deferred of $500,000 must be split proportionately between the two replacement properties Y and Z to determine what amount is taken from each property’s acquisition cost to come up with the new cost basis for each property. This 1031 Exchange calculator will estimate the taxable impact of your proposed sale and purchase. A 1031 Exchange allows real estate investors to defer capital gains tax on recently sold investment property by reinvesting. 1031 Exchange Alternatives if You Want to Back Out After Starting the Process Mar 21, 2022. The 1031 Exchange Timeline. A gain – sometimes referred to as a gain on sale – is the difference between the sales price of a property and its cost basis. Failure to use a QI can result in missteps, causing the disqualification of the exchange and the. 2. This method is popular with investors looking to upgrade properties without paying taxes on proceeds. The 1031 Exchange only defers the capital gains tax (long or short term) on the sale of real property by purchasing replacement real property of an equal or greater valueA 1031 Exchange is a commercial real estate transaction that allows investors to defer taxes on capital gained from the sale of an investment property by reinvesting in another property of like-kind value. e. 1031 Exchanges Don’t Work to Downsize an Investment. Its commercial division specializes in large, complex exchanges. A 1031 Exchange is a real estate transaction that allows real estate investors to defer capital gains taxes on the profitable sale of an investment property. A 1031 Exchange – sometimes called a Deferred Exchange or Like Kind Exchange – is a type of commercial real estate transaction that allows investors to defer capital gains taxes on the profitable sale of an investment property as long as they reinvest the sales proceeds into another “like kind property. The new property that is received in the Sec. Jeff Peterson is a qualified intermediary who helps people with their 1031 exchanges in the following areas. 4167 = 2. Applying section 1. Real estate investors are allowed to complete an exchange of. Internal Revenue Code outlines the rules investors must follow to defer paying any capital gains tax due by selling (or. Hours to Days Conversion Chart. An investor that holds property longer than 1 year will be taxed at the favorable capital gains tax rate. " This isn't just an event; it's a. Fortunately, more and more property managers are. “Buyer is aware that the seller intends to perform a 1031 exchange. A 1031 exchange is a real estate investing tool that allows investors to exchange an investment property for another property of equal or higher value and defer paying capital gains tax on the profit they make from the sale. It allows you to defer capital gains taxes when selling a property, as. In the first scenario, investors are able to take cash out of a property. Are you interested in deferring your taxes when you transition between investment properties but don’t want to roll all of your cash proceeds forward into. Generally, income earned in your business on a regular basis. -Loss recognized. 1031 (a)-1 (c) provides as an example of a like-kind exchange the exchange of a leasehold of real property with a remaining term of 30 years or more for a fee interest in real property. Whenever there was a doc missing or sign missing, they were quick to respond. The real estate in question must, however, pass two requirements: (1) it must be kept for investment purposes; and (2) it must be of “like kind. Adjusted Basis of condo: $104000. Capital Gains Calculator. • to a grantee other than a dealer, solely for the purpose of, and as a step in, the prompt sale to others. Section 1031 has been around for more than a century, but Congress is giving it another look. Jeff’s company is a Qualified Intermediary for 1031 exchanges of real estate. Let’s start with the simplest word: you. Section 1031 of the U. Boot is a portion of the sales proceeds you receive from a 1031 exchange that isn’t re-invested in a replacement property. You’re required to pay capital gains tax on that money. Section 1031 allows a deferral of gain when property held for investment or business use is exchanged for property of a like kind also to be held for investment or business use. This is another reason why consulting your accountant is a must. A like-kind exchange, or 1031 exchange, can only be completed for real property. S. A 1031 Exchange Delaware Statutory Trust (DST) is a legal entity created for the purpose of holding title to investment real estate. Their services can be as disparate as their cost. The QI instructs the person preparing the transfer deed to directly deed the property from the taxpayer to the buyer; however, the QI directly receives the funds from the closing of the sale. Assuming that all the five-year property identified in the cost segregation study is affixed to the building and considered real property for Sec. Exchanges may be fully tax-deferred, or partially deferred and partially taxable, depending on. Boot received is the money or the fair market value of “other property” received by the taxpayer in an exchange. However, investors can opt-out of two schedule depreciation and depreciate the calculated cost basis on a single schedule. The main reason for conducting a 1031 exchange is to defer the payment of capital gains tax. There was $700,000 of depreciation leftover at the time of the exchange (aka “carryover basis”). Increased Buying Power. We also offer a 1031 deadline calculator. Give our qualified intermediaries a call today to get your 1031 exchange off the ground. That’s $900,000 in capital gains. =Basis of like-kind property received. In Peabody Natural Resources Co . The remaining 10% will remain outside the exchange. All you need to do is subtract the exchange value of the property from the original property value. The exchange of property for the same kind of property may qualify as a nontaxable exchange under section 1031 of the Internal Revenue Code. WASHINGTON —– Today the Treasury Department and Internal Revenue Service issued final regulations relating to section 1031 like-kind exchanges. Split treatment: Use part of the property. For your convenience we list current Boydton mortgage rates to help real estate investors estimate monthly loan payments & find local lenders. This amount can range anywhere from 15-20% of the sale price, with an additional surtax of up to 3. The transitional rule applies only to the employer and does not allow a reverse 1031 exchange. To pay no tax when executing a 1031 Exchange, you must purchase at least as much as you sell (Net Sale) AND you must use all of the cash received (Net Cash Received). Boca Raton, FL. Calculate the taxes you can defer when selling a property. This 1031 Exchange calculator will estimate the taxable impact of your proposed sale and purchase. 1031 exchange is purchased for $1,500,000. A 1031 exchange is a commercial real estate transaction that allows investors to defer capital gains taxes on the profitable sale of an investment property as long as the sale proceeds are reinvested/used to purchase a like-kind property. A 1031 Exchange in commercial real estate is a transaction that allows a commercial property seller to defer paying taxes on the sale of the property if they use the funds to buy another, similar property within a specific period of time. A property is “like-kind” when it is replacing another similar property. Option 1: Separate depreciation schedules. Under Section 1031, taxpayers can postpone paying this tax if they reinvest the profit in similar property. Here is a short definition of a delayed 1031 exchange: A delayed 1031 exchange is a 1031 exchange in which the exchanger first sells relinquished property and then buys replacement property using the proceeds from the sold one. Only the excess. All three steps must be completed for the tax return to contain the correct information. A 1031 Exchange is a real estate transaction that allows individual investors to defer long term capital gains taxes on the profitable sale of a real estate investment property as long as the sales proceeds are reinvested into another, like kind property. Do the Math. This method is popular with investors looking to upgrade properties without paying taxes on proceeds. -Loss recognized. Internal Revenue Code (IRC) Section 1031 states that any exchange of properties of similar use can be exempt from most taxes. As of this writing, the top capital gains tax rate is 20%. For homeowners wanting more flexibility in the 1031 exchange timeline, there is such a thing as a deferred exchange in which the owner sells the property to a qualified intermediary, known as a 1031. The proceeds from the sale of an investment property are subject to a combination of state and federal capital gains taxes, Medicare tax, as well as the tax on the recapture of depreciation and other fees. The main disadvantage of 1031 exchange is that it offers a reduced basis for depreciation in the replacement property. The IRS generally considers real estate properties like -kind regardless of their quality or. §1. Holding period requirements do not have a clear answer. If you are risk-averse or in no hurry, the wait may make sense. This is what I come up with when I simply plug in the numbers in the example. It has been my primary residence but I want to move. Question 8. Replacement property must be purchased within 180 days. 8% in taxes on the sale of their investment property because of capital gain and depreciation recapture. Jeff Peterson can be reached by telephone at (612) 643-1031 or toll free at (877) 373-1031. C. (2) Based on amount of depreciation taken during ownership of the property. These sections provide that taxpayers in a 1031 Exchange that sell California Property and purchase NON-California Replacement Property will be required to file an annual information return with the. We hope you can find what you need here. Failure to use a QI can result in missteps, causing the disqualification of the exchange and the.