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BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 933
Experience:  Owner of a CPA firm
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I sold my apartment building for $2.3 million and netted

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I sold my apartment building for $2.3 million and netted $2.1 after closing cost. I took 600k and purchased a new condo which I have rented out and qualified for a 1031 exchange. I had a intermediary handle the transaction within the required time frame. There was no liability outstanding on the building. The asset was part of a S corporation located in NYC.I have additional income of approximated 20k from the s corp. I have made estimated tax payments to
the NYC general corporation tax and personal estimated tax payments both federal and state based on a gain of $1,552,000The sale of the apartment building took place on February 2015 and the like kind exchange took place within the required time frame (July 2015) From the proceeds of the sale $600k was sent to
the intermediary to purchase the new property.I am trying to record the transactions on my books and have done the following which I feel is incorrect When I run my tax software it tell me that my gain is different than what I have booked stating that it is
the amount of cash I received $1,552,000 or boot.Cash received on sale less the amount held by intermediary:
cash 1,552,000
accum dep 51,000
building 171,000
land 5,000
gain on sale???? 1,427,000The new section 1031 asset
Condo 600,000
Paid in Cap ?? 600,000this is how I handled the monies that were transferred directly from the firm handling the 1031 which I never saw or received.How do I reconcile the difference in my retain earnings account from tax to books or what am I missing??? What am I missing or not seeing????????????
Submitted: 1 year ago.
Category: Tax
Expert:  BK-CPA replied 1 year ago.

Hello and thank you for your question.

It's hard to say because I don't know what you recorded on your books. For tax purposes your gain is generally the amount of your boot, aka cash received. For book purposes you have a much larger gain equal to the total value of property received (cash and a new building) less your carrying value of the old building. My guess is that you have not recorded the full gain on your books, only the gain for tax purposes. To reconcile your net income per books with your taxable income you'll have to reduce your net income per books by your excluded gain for tax purposes. You do this on Schedule M-1 (line 5, income recorded on books not recorded on Schedule K lines 1-10).

Absent something like that, I apologize because I have no clue. I suggest hiring someone to prepare the return this year... Actually, unless you are a tax professional, there's a strong possibility that you are missing things and costing yourself money by trying to do it alone, so for this level of assets and income you may want to be hiring a tax professional every year.

Best of luck!