Orange County 1031 Exchange - Step six - Equal or UP Investment

You Must Buy a Property that is Equal or Greater in Value Than the One That You Have Sold or There’s No 1031.

Debbie Ferrari moderating a meeting of IRC/1031 Property Exchange Professionals.

To shelter 100% of the taxes on your exchange, you need to buy a property that is equal in value or greater than the one that you sold.

Be sure that you reinvest all of the cash that you got from the old property.

Then, buy one or more properties that are equal to or more than the net sale price of what you sold.

There are two factors to consider in figuring the equal or up number.

Debt Relief: This is the term for the money used to eliminate debt against the property, such as first, second, third mortgages, leins, etc.

Cash: This includes the amount of debt relief, plus the cash that you would get as seller. Together, these two sums comprise the target replacement value that you need to invest in the new property or properties to defer of 100% of the taxes on your sale.

Note: YOU CAN TAKE MONEY OUT if you want at closing. The IRS calls this money, “boot.” It IS taxable, but you are free to remove it from the exchange and keep the 1031 valid, if this feature was addressed in your early documentation.