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I sold my 1031 exchange at a loss. No reinvesting, will I

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I sold my 1031 exchange...
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: 2 years ago.Category: Tax
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Customer reply replied 2 years 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.
Answered in 45 minutes by:
11/30/2015
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 16,245
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello

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.

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Customer reply replied 2 years 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?
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years 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

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

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