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Thank you, Donna! I'll pass this on.

I just had a class in cryptocurrency, and had to deal with a client that had tons of little bits of crypto ‘earned’ from god knows what. I’m too old to deal with this!

Yes, as I said, if you use Crypto, you have to report it. You have a Schedule D sale proceeds, in your scenario $160,000. You have the $10,000 basis, that I think you meant. But depending on how/when you bought the coins and how/when you "sold" them, you might have several lines to report instead of just one on Form 8949. If you didn't go on your buying spree until January, you wouldn't have anything to report on the current year return.

IRS could view this as tax avoidance by pulling money out so soon after the 1031 exchange, and especially since the funds weren't being used to further the business purpose of this property. The taxpayer certainly can borrow more or refinance, but the longer between the exchange and borrowing, the better. Better yet would be that the borrowing not occur until a subsequent tax year. AND, the taxpayer should also have meticulous records of how the funds were used for the property in order to justify the transaction. Six months seems too close for comfort.

In this scenario, taxpayer has a taxable gain because net equity in new property is less than net equity in the property given up.