In any 1031 exchange, the taxpayer conducting the exchange needs to re-invest their net proceeds from the sale of their relinquished property into their new replacement property. But how much money do you need to re-invest into the replacement property? This can cause a lot of confusion among taxpayers. In this article, we’ll discuss what exactly you need to re-invest into your replacement property during the course of a 1031 exchange.
Defer All of Your Taxes
If you want to defer 100% of your capital gains taxes in a 1031 exchange, you need to re-invest your proceeds into a property of equal or greater value than your relinquished property. By way of an example, if your relinquished property is sold for $600,000 (with $300,000 equity), you would need to re-invest in a replacement property that has a value of at least $600,000 (with $300,000 equity).
But what if you want to exchange into a replacement property that has a lower value than your relinquished property? In this instance, you would likely face some tax exposure during the exchange. You could also exchange into multiple properties to satisfy this requirement.
Learn How to Save Money on Capital Gains Taxes
CPEC1031, LLC is a full-service 1031 exchange company. We have twenty years of experience facilitating like-kind exchanges for clients under section 1031 of the Internal Revenue Code. Our intermediaries can prepare your 1031 exchange documents and walk you through each and every step of the process. Contact us today to learn more about our like-kind exchange services and how we can help you save money on your next real estate sale. Our main office is located in downtown Minneapolis, but we work with clients from all over the United States.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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