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If property is sold for $740K, does it mean, we can ONLY 1031 another $740K or so property (properties?) from proceeds? We will have only $385K left after all the fees and mortgage paid off.
Like kind property only means, it is a property held for investment purposes, and to get full 1031 exchange benefits, must be the same price as the property you are getting rid of or higher.
How much cash you have after it is sold has nothing to do about it being a full 1031 exchange.
Instead of trying to get information on a forum like this, talk to an accountant that specializes in 1031 exchanges to get advice you can actually use.
Oldtrader is correct. The sales price needs to match the new purchase price. This can be difficult as most sellers lose at least 10% to commissions, title insurance fees, intermediary fees, and other closing statement fees. Then after paying off the mortgage, and you are left with a down-payment to work with. You must have that pre-approval for the next mortgage lined up for the new 1031 property since the 45 days to identify the replacement property clock is ticking. Some people get in trouble because they don't qualify for the next mortgage, stuck with paying out a large capital gain tax.
As you know, the new 1031 property can have a wide definition as to what it can be - any realty that is an investment where you don't live for at least two years following purchase. Then - if it's a residence and not a gas station that you purchase, you can move into the house /condo if you want, but only AFTER two years. Then you can live there three years, and qualify for the 2 out of 5 rule - sheltered $250K-Single / $500K-Married capital gains. So you can then sell if you choose. But you must hold the property at least five years after the purchase of the 1031 investment, or you are subject to capital gains.
Did you find a good 1031 intermediary to help with the process?
Oldtrader is correct. The sales price needs to match the new purchase price. This can be difficult as most sellers lose at least 10% to commissions, title insurance fees, intermediary fees, and other closing statement fees. Then after paying off the mortgage, and you are left with a down-payment to work with. You must have that pre-approval for the next mortgage lined up for the new 1031 property since the 45 days to identify the replacement property clock is ticking. Some people get in trouble because they don't qualify for the next mortgage, stuck with paying out a large capital gain tax.
As you know, the new 1031 property can have a wide definition as to what it can be - any realty that is an investment where you don't live for at least two years following purchase. Then - if it's a residence and not a gas station that you purchase, you can move into the house /condo if you want, but only AFTER two years. Then you can live there three years, and qualify for the 2 out of 5 rule - sheltered $250K-Single / $500K-Married capital gains. So you can then sell if you choose. But you must hold the property at least five years after the purchase of the 1031 investment, or you are subject to capital gains.
Did you find a good 1031 intermediary to help with the process?
As you may know, it's not quite that simple. Recapture depreciation gain is not eligible for the tax exclusion and neither is the gain attributed to the period of "non-qualifying" use. Plenty of reasons to seek good tax advice before trying to claim a principal residence exclusion after the property was part of a 1031 exchange.
Well, I got my answer. No can do, I am not getting into another $700K mortgage. Will eat crap next year tax time, but oh well, will be mortgage free though for years to come.
It was a very sweet deal when owner occupants could move into former rentals to maximize tax savings without recapture provisions.
A retired builder friend did just this... over the years he had accumulated several single family rentals...
His retirement strategy was to move into each one for 2 years and then sell for maximum tax savings... he did this 4 times in the SF Bay Area much to his wife's chagrin...
The end game was a beautiful Nevada side lakeside home in Zephyr Cove Lake Tahoe...
It was a very sweet deal when owner occupants could move into former rentals to maximize tax savings without recapture provisions.
A retired builder friend did just this... over the years he had accumulated several single family rentals...
His retirement strategy was to move into each one for 2 years and then sell for maximum tax savings... he did this 4 times in the SF Bay Area much to his wife's chagrin...
The end game was a beautiful Nevada side lakeside home in Zephyr Cove Lake Tahoe...
Not sure when that law went to effect about having to recapture depreciation but we were caught in that situation last year when we sold a rental (rented for 5 yrs) then we had moved into for 2 years but had to pay capital gains on the recapture of depreciation. I was not happy, but couldn't be helped. We will not be doing that again, haha!
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