1031 exchange:
Capital Gains Tax Example
Considering 1031. Property in CA. Paid 129,000; depreciation 35,000; mortgage payoff 95,000 taken from selling price; sale commission 25,000; Selling 485,000. Buying Property in TN 350,000; no mortgage. 1031 ok? Fed tax amount owed?
Dear R: Thank you for contacting us. The tax in your example is estimated as follows: $485K- $25K= $460 net sale price. $460K-$350K= $110K trade down in value. Of that the first $35K will be recaptured depreciation taxed at 25% ($8,750) and the remaining $75K will be long term cap. gain taxed at 15% ($11,250). Finally the entire $110K will also be taxed at 9.3% California State tax ($10,230). TOTAL ESTIMATED TAX YOUR EXAMPLE= $30,230. The exchange still provides significant tax savings to you. If you want to defer all taxes you will have to buy a second property of at least $110K. I hope we can help you with your 1031x.
Sincerely,
Steve Hickox
Attorney / President
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Denver, CO 80222
888-899-1031
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