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I own a piece of property in CA and was told that if I sold…

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I own a piece of...
I own a piece of property in CA and was told that if I sold it I could by another piece of property with the use of a 1031 exchange to obtain the old taxes for the new property. What is a 1031 exchange and how does it work? Do I have to buy a property for the same price the other one was sold for or can I buy one that is worth more? Thank you!
Submitted: 6 months ago.Category: Tax
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8/2/2017
Tax Professional: Barbara, Enrolled Agent replied 6 months ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,850
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

A 1031 exchange defers any CAPITAL GAINS on the sale of investment property. It does not apply to property taxes.

The following links contain information about 1031 exchanges:

https://www.irs.gov/uac/like-kind-exchanges-under-irc-code-section-1031

https://apiexchange.com/what-is-a-1031-exchange/

The following are the requirements for Prop 60/90 regarding property taxes:

What are the eligibility requirements for Propositions 60/90?

  1. You, or a spouse residing with you, must have been at least 55 years of age when the original property was sold.
  2. The replacement property must be your principal residence and must be eligible for the homeowners' exemption or disabled veterans' exemption.
  3. The replacement property must be of equal or lesser "current market value" than the original property. The "equal or lesser" test is applied to the entire replacement property, even if the owner of the original property purchases only a partial interest in the replacement property. Owners of two qualifying original properties may not combine the values of those properties in order to qualify for a Proposition 60 base-year value transfer to a replacement property of greater value than the more valuable of the two original properties.
  4. The replacement property must be purchased or built within two years (before or after) of the sale of the original property.
  5. To receive retroactive relief from the date of transfer, you must file your claim within three years following the purchase date or new construction completion date of the replacement property.
  6. Your original property must have been eligible for the homeowners' or disabled veterans' exemption either at the time it was sold or within two years of the purchase or construction of the replacement property.

The original property must be subject to reappraisal at its current fair market value at the time of sale, unless the buyer(s) of your original property also qualify the property as a replacement property for a base year value transfer due to disaster relief or a base year value transfer for a severely and permanently disabled person. Therefore, most transfers between parents and children will not qualify.

This is a one-time only benefit. Once you have filed and received this tax relief, neither you nor your spouse who resides with you can ever file again, even upon your spouse's death or if the two of you divorce. The only exception is that if you become disabled after receiving this tax relief for age, you may transfer the base year value a second time because of the disability, which involves a different claim form.

http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm#2

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Tax Professional: Barbara, Enrolled Agent replied 6 months ago

Just following up with you to see if you have any other questions. If so, please let me know so I can further assist you.

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