Have a Tax Question? Ask a Tax Expert
Hi, my name is Mark. I will be happy to help you with your questions.
Was the land purchased for $96,000? Is the $960,000 a typo?
It looks like you have about a $300,000 gain that you may be able to defer with a 1031 exchange.
A 1031 Exchange is reported on Form 8824. Here is a link to a useful spreadsheet that will help you with your potential deferred gain.
Have you executed any 1031 exchanges in the past. There are specific steps that need to be taken for a 1031 exchange.
If you built the home in 2016. The home would be treated as a Short Term Capital Gain. For simplicity sake assume that the total gain of $300,000. 80% of the sale would be allocated to the home and 20% to the land. So the home would sell for $640,000 and there would be a short-term capital gain of $240,000. The land would sell for $160,000 and would result in a Long Term Gain of $60,000.
These transactions would be reported on schedule D.
If you are able to do a 1031 exchange would potentially could defer the gain of $300,000. Your basis in the property being sold ($496,000) would carry over to the new property. If you receive cash (also known as boot) you would recognize gain. If you are relieved of debt, this would also create a situation where a gain would be recognized.
I hope you found this information to be beneficial. If this answered your question please take a few moments to rate my response. A rating is needed in order for me to receive credit for helping you today. The rating bar is located at the top of the page – ranging from 1 to 5 stars. If you need me to clarify aspect of my response or if there are additional areas of the question that you would like me to consider please let me know. I would be happy to continue the discussion. It has been my pleasure helping you today.