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Lev, Tax Preparer
Category: Finance
Satisfied Customers: 29573
Experience:  Personal Investment, Tax Preparation
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I sold my home and trying to do 1031 exchange with another

Customer Question

I sold my home and trying to do 1031 exchange with another property. So I got the money in the escrow from the sale. I'm planning to use some portion of it for emergency use but planning to put it back in a month. is that ok to do or will I be charge with tax for using that money?
Submitted: 1 year ago.
Category: Finance
Expert:  Lev replied 1 year ago.
The issue is that if that is YOUR personal home - it doesn't qualify for section 1031 exchange.Only business or investment assets qualify.For instance - if that is your rental property - then you may conduct section 1031 exchange.Please verify.
Customer: replied 1 year ago.
Sorry I meant my apartment unit which was a rental property.
Expert:  Lev replied 1 year ago.
There is NO requirements to reinvest the entire amount.But if you want to defer recognition of taxable income under section 1031 - you would need to use proceeds to purchase another like-kind property.If you for instance - will use the entire $250K to purchase the replacement property - all income will be deferred (not avoided!).But if you for instance will purchase a replacement property for $125k - a half of the gain will be deferred and another half will be recognized (included into your taxable income)..The person can use section 1031 like-kind exchange and defer tax liability if the proceeds from the sale go through a "qualified intermediary" (QI) and are not paid to the person. If the proceeds are paid to the person - the sale transaction becomes taxable.Sec. 1031 requires that within 45 days of the sale of the old property, that you must identify the replacement property and must complete the purchase of the replacement property within 180 days of the sale of the old property.