1031 exchange:
Should I 1031 Exchange a Property Received by Gift?
Here's our scenario
- we own a $330,000 4-plex which we currently have on the market. Our original plan was to sell it, pay off the $215,000 we owe against it and then use the rest for other investments. We were gifted the property 20% per year for 3 years and the final 40% last year.
Would it be smarter for us to 1031 it and apply the gains to our commercial property?
Dear M:
Because you were gifted the property (over time) your tax basis in the property will start as a carried over basis from the person who gifted the property to you. If the donor held the property for a long time then there is probably a very large gain in this property, which you are now responsible for.
Do not mistake the size of the mortgage with the basis. They are unrelated to one another. You are probably in a perfect position to do a 1031 exchange. A good starting point is to determine what your basis in the 4-plex is.
Do you have a professional tax preparer? If so they can tell you what your basis is in the property. Please feel free to contact me further about this and we look forward to helping you with the 1031 exchange.
Sincerely,
Steven Hickox President 1031x.
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