cash out upon sale

Comments: I have a property that is worth 300k and originally paid  29k.This leaves a 271k gain. Question: Can I pull the 29k from the sale  without being taxed.

 

The general rule to fully defer capital gain in a 1031 exchange is that you must trade equal or up in value and in equity.  Equity is created by you down payment, gradual reduction in loan amount and appreciation.  When you sell it doesn't matter how the equity is created, if you take sale proceeds out it will be treated as taxable capital gain and not as return of your original investment. Sorry.

  

Sale of principal residence before two years

I have sold my primary residence that I have been living in for  less then 2 yrs.  I will be making money on it, but am going to be getting  a loan to build on land that we have.  That will be our primary residence  once it is completed.  Do we have to pay capital gain if we are going to  be putting that money back in to another home, even though it is not built  yet?

 

Section 1031 has no application here.   Instead your situation is governed by Section 121 and its regulations.  New regulations allow for partial exclusion of gain from the sale of your principal residence even if you sell it before two years of ownership.  Valid reasons for selling include change of employment, health and unforeseen change in circumstances.  If one of these reasons applies to you you may not be liable for capital gains taxes.

  

1031x and property taxes

 

HI

 

I AM JUST GETTING FAMILIAR W/1031'S.

ARE LOCAL REAL ESTATE TAXES DEFERRED AS WELL?

THANKS  E.

 

Dear E:  Section 1031 deals with the deferral of income tax.  Generally both Federal and State income tax is deferred.  Local property taxes are not deferred.  Please let us know if we can be of help to you.  Sincerely,

  

1031x and assumable financing

Hello there.
>
> I have a question concerning the replacement property in an exchange. If  the replacement property has an Assumable Mortgage, how can the exchange  transaction take place? Do the proceeds from the relinquished property go  towards principal on the existing mortgage? Can the proceeds go towards  paying off the owner's equity at closing? In general how would it be possible to assume a mortgage on the replacement property and still have it qualify for the exchange? Thanks  for your help. Cliff

 

Dear Cliff:  Generally an assumable mortgage is not trouble.  Just remember the general rule that you must trade equal or up in value and in equity to fully defer your tax liability.  In your question cash from your sale can go to the seller and/or the lender (as pay down of principal on the loan).  If you anticipate more cash from your sale than you need for your purchase then you can place a second mortgage on your sale property to balance out your equity position.  We make these kind of loans at reasonable terms.  I hope this is all clear to you if not try me again and use "real numbers."   Sincerely,

  

Hurricane Katrina Relief Granted by IRS

IR-2005-84 ( 08/30/05 )
Portions of Louisiana (31 parishes), Mississippi (15 counties), and Alabama (3 counties) are eligible for special tax relief.

Taxpayers involved in 1031x transactions may be eligible for an extension of their "time sensitive deadlines" under Notice 2005-3. A 120 day (for IRC 1031 transactions) extension is granted under its General Rule extension.

"Time sensitive acts" include (1) the 45 day identification deadline and the 180 day exchange deadline for delayed exchanges
A taxpayer qualifies for the extension if (a) the relinquished property was transferred on or before the disaster declaration; and (b) the taxpayer is an "affected taxpayer" or has difficulty meeting the time deadlines due to the disaster.

"Affected taxpayers" include individuals and businesses located in the disaster area, those whose tax records are located in the disaster area, and relief workers.
Reasons for having "difficulty meeting the time deadlines due to the disaster" include:

1. The relinquished or replacement property is in the disaster area;
2. The principal place of business of one of the parties involved in the exchange is located in the disaster area, specifically mentioned as parties are the QI, EAT, transferee, settlement attorney/agent, lender/financial institution, and title insurer;
3. Any party to the transaction (or an employee involved in the transaction) is killed, injured, or missing as a result of the disaster;
4. A document prepared in connection with the exchange (i.e., Exchange Agreement or an assignment or deed) or a relevant land record (i.e., documents at the Recorder's Office?) is destroyed, damaged, or lost as a result of the disaster;
5. A lender decides to permanently or temporarily suspend funding of loans for real estate closings due to the disaster or due to the unavailability of flood, disaster, or other hazard insurance due to the disaster;
6. A title insurer is unable to provide a required title insurance policy at closing due to the disaster; and
7. Any similar reason.
Additionally, Notice 2005-3 permits a 120 day postponement, for delayed exchanges, of the 180 day exchange deadline if, after the end of the 45 day identification period, the identified replacement property is "substantially damaged" or, in the case of a safe harbor reverse exchange, the identified relinquished property is substantially damaged.