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I have a 1 million dollar property that I purchased for 1/2…

I have a 1...

I have a 1 million dollar property that I purchased for 1/2 million in exchange funds and about $150k cash. Can I 1031 exchange this property for a home that is about $750k and take the balance as capital gains?

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

The property is a residential income property.

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Answered in 2 hours by:
3/27/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,118
Experience: Taxes, Immigration, Labor Relations
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Yes - you may conduct a partial section 1031 exchange and will recognize a partial gain.

So if you sell for $1 million and purchase a replacement property for $750k - you will realize $250k as taxable gain.

You may exchange one real property fr another real property - these will be consider like-kind.
The only limitation - both properties must be business or investment properties - not for personal use.

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Customer reply replied 3 months ago
Thank you for that. Suppose that I put another $150,000 in improvements to the property. Can I deduct that from the $250k capital gains amount and declare only $100k as capital gains?

Improvement costs are ADDED to the basis - and not separately deducted.

You will need recalculate your gain and determine a part of the gain you defer in section 1031.

But you will NOT be able to to reduce $250k boot...

Sorry.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,118
Experience: Taxes, Immigration, Labor Relations
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