Asked by Nettrickr  |  Submitted January 01, 2017

Can you explain a 1031 exchange using two existing rental properties buying one property and what income tax there would be?

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  Answers  |  1

January 04, 2017

Hi Nettrickr

A 1031 exchange is designed to defer taxes. Check with your property attorney for specifics in your situation.

The exchange can include like-kind property exclusively or it can include like-kind property along with cash, liabilities and property that are not like-kind. If you receive cash, relief from debt, or property that is not like-kind, however, you may trigger some taxable gain in the year of the exchange. There can be both deferred and recognized gain in the same transaction when a taxpayer exchanges for like-kind property of lesser value.

Here is a link to the IRS regulations:
https://www.irs.gov/uac/like-kind-exchanges-under-irc-code-section-1031

You can contact us directly for more information or to discuss in greater detail.

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