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I have a property that I bought July of 2017 for 75k, I've…

I have a property...

I have a property that I bought July of 2017 for 75k, I've invested 40k in repairs and I'm selling it for 162k. Anticipating roughly 35k in profit. Can I take advantage of the 1031 exchange to minimize tax exposure?

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

I have other properties that I purchase and rent. But this is one bought purely for investing, and it's my 1st one so I'm not sure how to handle it for tax purposes to minimize my tax exposure...

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Answered in 5 minutes by:
3/9/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,643
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Hello!

My name is***** will assist you today.

Please give me one moment while I review your question and type my initial response

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Yes, you are able to use a 1031 exchange to exchange your investment property bought in 2017 for another "like-kind" investment property.

___

There are certain regulations that must be followed to properly perform a 1031 exchange.

For example:

"The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties. The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary. "

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You must report an exchange to the IRS on Form 8824, Like-Kind Exchanges and file it with your tax return for the year in which the exchange occurred.

I have included a link to Form 8824 below for you to review.

https://www.irs.gov/pub/irs-pdf/f8824.pdf

Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

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Customer reply replied 4 months ago
I need this intermediary prior to closing on the property correct?

Yes, because the money from the sale of the first property has to be placed with the intermediary

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You can not accept the funds yourself or the proceeds will be taxable.

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Please let me know if you have any additional questions.

When you have no additional questions please take a moment to accept the answer by clicking on three stars or more.

Thank you.

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Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,643
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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