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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15332
Experience:  15years with H & R Block. Divisional leader, Instructor
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I sold my 1031 exchange at a loss. No reinvesting, will I

Customer Question

I sold my 1031 exchange at a loss . No reinvesting , will I still have to pay the deferred taxes from the 10 year old 1031 exchange
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
I sold for 310 with a gain of 137 reinvested 106 in a 1031 exchange for a property of 240. Now I just sold the property with many loses for 195. I got 31k in hand.
Expert:  Robin D. replied 1 year ago.


When the replacement property is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.

The basis of property acquired in a Section 1031 exchange is the basis of the property given up with some adjustments. This transfer of basis from the relinquished to the replacement property preserves the deferred gain for later recognition.

In short yes, you still must report the gain from the 1031 now that you have sold the replacement property.

Customer: replied 1 year ago.
thank you . I still have to pay these deferred taxes even though I have no gains on the sale of this property? I am writing off many loses. I gained nothing but still have to pay the deferred on the old property ? correct?
Expert:  Robin D. replied 1 year ago.

Yes, the tax on the original was only deferred not voided or discarded. You trigger all of the deferred gain and depreciation recapture upon sale.

If the property has dropped enough in value (i.e. more than what the deferred gain was), then your deferred capital gain has been wiped out and you would have no tax

Expert:  Robin D. replied 1 year ago.

Please advise if you need more information or rating in a positive way is acceptable.

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Expert:  Robin D. replied 1 year ago.

Did you need to post again before you rate?