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When selling a 1031 property is the existing mortgage

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compounded with the gain necessary...
when selling a 1031 property is the existing mortgage compounded with the gain necessary to purchase another like property??
Submitted: 10 months ago.Category: Tax
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Answered in 11 minutes by:
9/30/2017
Tax Professional: Barbara, Enrolled Agent replied 10 months ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,688
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.

You are required to replace the amount of mortgage debt on the relinquished property with new mortgage debt on the replacement property.

In a 1031 exchange, if you receive property that has less mortgage debt than the property you transferred, this imbalance in your favor will be treated the same as the receipt of cash. This is how mortgage boot is created:

Mortgage boot is triggered when you have received a property with less debt attached than your own property. The tax code treats this reduction of debt as a form of income. Unless your 1031 transaction is somehow balanced out with additional cash or personal property, your debt reduction will create a tax liability.

The following links contain excellent additional information which you will find helpful:

https://www.cwscapital.com/insights/how-1031-like-kind-exchange-mortgage-boot-and-cash-boot-can-impact-real-estate-investment/

https://americantitlemt.com/faq/questions-1031-exchanges/

Please let me know if I can assist you further. If I have answered your question, please take a moment to rate my answer since that is the only way I receive credit for answering you.

Thank you and best regards,

Barb

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Customer reply replied 10 months ago
thank you for your resonse...it was really helpful...
Tax Professional: Barbara, Enrolled Agent replied 10 months ago

My pleasure.

Have a great weekend!

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Tax Professional: Barbara, Enrolled Agent replied 10 months ago

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

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