Sage Posted December 22, 2023 Report Share Posted December 22, 2023 Does 1031 incur a higher taxable gain when the 1031 property is eventually sold? A very simple example - Cost: $250k (assuming no adj to basis) Sold: $330k Gain = $80k (deferred) Cost of exchanged property: $410k Basis of the like kind property received: $250K If the exchanged property sold for $500k Taxable Capital Gain - No like kind exchange: 1st property: 330k - 250k = $80K 2nd property: $500k - 410K = $90K Total: 160K Like kind exchange: Gain = 500k - 250k = $250k Please advise if I m missing a step or information. Thank you! Quote Link to comment Share on other sites More sharing options...
kathyc2 Posted December 22, 2023 Report Share Posted December 22, 2023 Basis of new property is 330 (410 - 80), not 250. 2 Quote Link to comment Share on other sites More sharing options...
Sage Posted December 22, 2023 Author Report Share Posted December 22, 2023 1 minute ago, kathyc2 said: Basis of new property is 330 (410 - 80), not 250. I see. Thank you!!!!!!! Quote Link to comment Share on other sites More sharing options...
Sage Posted December 22, 2023 Author Report Share Posted December 22, 2023 21 minutes ago, kathyc2 said: Basis of new property is 330 (410 - 80), not 250. Would that be the number showing on line 25 of 8824? Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted December 22, 2023 Report Share Posted December 22, 2023 1 hour ago, Sage said: Does 1031 incur a higher taxable gain when the 1031 property is eventually sold? No, the gain from the first property is deferred to the sale of the second property. The total gain is the same, but there a possibility that the combined gain on the second sale could push the taxpayer into a higher tax bracket. 2 Quote Link to comment Share on other sites More sharing options...
kathyc2 Posted December 22, 2023 Report Share Posted December 22, 2023 2 hours ago, Sage said: Would that be the number showing on line 25 of 8824? Yes. Remember you need to add the additional cash given of 80 (410 - 330) to the basis of old property on line 18. Line 16 & 17 410,000 Line 18 330,000 Lines 19 & 24 80,000 Line 25 330,000 1 Quote Link to comment Share on other sites More sharing options...
Sage Posted December 23, 2023 Author Report Share Posted December 23, 2023 12 hours ago, kathyc2 said: Yes. Remember you need to add the additional cash given of 80 (410 - 330) to the basis of old property on line 18. Line 16 & 17 410,000 Line 18 330,000 Lines 19 & 24 80,000 Line 25 330,000 How about if mortgage is involve. Mortgage with old property and mortgage with new property. Should the be included on any of the line? 15 hours ago, DANRVAN said: No, the gain from the first property is deferred to the sale of the second property. The total gain is the same, but there a possibility that the combined gain on the second sale could push the taxpayer into a higher tax bracket. Thank you for the clarification! Appreciate everyone taking your time to answer my questions! Quote Link to comment Share on other sites More sharing options...
kathyc2 Posted December 23, 2023 Report Share Posted December 23, 2023 1 hour ago, Sage said: How about if mortgage is involve. Mortgage with old property and mortgage with new property. Should the be included on any of the line? Yes. Read the instructions for 8824 and follow the examples they lay out. Be aware that may cause only a portion of the gain to be deferred and a portion to be included in current income. 2 Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.