1031 exchange:
Taking Cash Out of a 1031 exchange
Hello, Thanks for taking my question. In 2003 I sold a property under 1031. The original sale price was $125000. and we sold the property for $175000. We then used the 1031 and purchased a rental property for $210000 thus avoiding capital gains. We are now going to sell the new property in early 2006 for $230000. We are not going to purchase a new property but just take the money from the purchase and pay off bills and invest the rest. Please tell me what amount of capital gains I will be taxed on and at what amount. Thanks, D
Dear D: In your example you would be taxed on at least $105K at 15% long term capital gains. That does not take into consideration recapture of depreciation or state income tax. I believe that your tax liability will be larger than you think. Are you sure you want to do this? If you just need cash why don't you refinance the property and take cash out tax free? Contact me for more strategies.
Sincerely,
Steve Hickox
Attorney / President
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