1031 exchange:
Net Sales Price in a 1031 Exchange
Dear 1031x: My husband and I own a home outright that we have rented out to a couple for 18 years. We want to sell it at $495K. Someone has offer to buy it at $545K and have us credit back $50K to them for upgrades and repairs and have us still get our asking price. What are the tax ramifications and can we claim this credit on our taxes. Sincerely, B. Dear B: The sale with credit back will be treated as a sale at the lower price. In your example, if you sell for $545 and credit back $50K the IRS will treat this as a sale for $495, in fact. In a 1031x you would then have to repurchase for $495 (not $545) in order to defer all of your taxes. Beware of one thing. If the buyers want you to do this off settlement statement, so that it is not evident what is happening to everyone then you might be assisting in a lenders fraud, if the buyers are getting a loan on the purchase. However, if you put it on the HUD-1 I see no problem. I hope you will chose us for your 1031 exchange. Sincerely,
