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Your taxes will be based on the gain on sale of the property. Gain will be calculated as the sales price less the selling expenses less the adjusted basis of the property. This adjusted basis of the property is the basis determined at the time of Sec 1031 exchange as per the IRS rules. It may be the original cost basis of the property in Sec 1031 exchange less depreciation claimed on that property and the new property and increased by any additional amount paid.
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Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.