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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
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Experience:  Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
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I own a rental property with a basis of 50,000. I have a chance

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I own a rental property with a basis of 50,000. I have a chance to sell it for 270,000. There is an apartment house I want to buy for 360,000. I want to defer the profit from the rental sale. Can I do a 1031 exchange. If so, how do I do it? I plan to continue investing in real estate in the future. Please cite Reg.
Submitted: 2 years ago.
Category: Tax
Expert:  Megan C replied 2 years ago.
When you make the sale, you will need to have a qualified intermediary to hold the funds for you. You cannot hold the funds, and you can't use your CPA or attorney to hold the funds for you either (Regulations under IRC Section 1031 disqualify any attorney, broker, accountant or real estate agent who provides routine service to the taxpayer from holding exchange funds).

You will fill out form 8824 for the like-kind exchange.

The regulation IS Section 1031.

Do NOT file your tax return until the exchange is complete.

Here's a link to some do's and don'ts

http://www.1031exchangemadesimple.com/dos-donts.html

http://www.irs.gov/businesses/small/industries/article/0,,id=98491,00.html
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12471
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

I guess your agreeing with me that I can defer my capital gain on the rental until I sell the apartment. What would be the basis in the new property? Thanks

Expert:  Megan C replied 2 years ago.
We don't give tax advice or issue opinions. We only give general information. If you are trading one similar property for another piece of similar property, that's a like kind exchange. You would have to get a CPA to issue you an opinion after looking at all the details of the transaction.

Your basis would be calculated using this worksheet: http://www.1031exchangetax.com/worksheet.htm

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