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TaxRobin
TaxRobin, Tax Preparer
Category: Capital Gains and Losses
Satisfied Customers: 15733
Experience:  15+ years in Tax preparartion as well as Instructor for tax law, theory, and application
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Can you take the loss on the sale of a replacement property

Customer Question

Can you take the loss on the sale of a replacement property that was originally acquired in a 1031 Exchange ?
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  TaxRobin replied 1 year ago.

Hello

Structuring the disposition or sale of any investment property as a 1031 exchange will require that the income tax consequence be deferred whether it is a gain or loss.

The loss on a sale is allowed even if the property was acquired in a 1031 Exchange.

When you do a 1031 exchange your basis from the Old Property rolls over to the New. The Old basis is modified slightly if you buy-up, but not if you buy-down.

If there is a true loss after applying the correct basis for the replacement property then the loss is allowed.