A partial 1031 exchange can allow you to defer some of your taxes. Whichever form it’s in, the portion of the proceeds that is considered “boot” is subject to capital gains and depreciation recapture taxes if they apply. The remaining net proceeds that are reinvested will be tax-deferred.

How do I report a partial 1031 exchange on my taxes?

Your 1031 exchange must be reported by completing Form 8824 and filing it along with your federal income tax return. If you completed more than one exchange, a different form must be completed for each exchange.

What are the cons of a partial 1031 exchange?

As an example, your relinquished property sells for $300,000 and has a $20,000 mortgage. You can 1031 exchange the $300,000 into the replacement property, generating a tax bill on the $20,000 boot. What Are The Cons of a Partial 1031 Exchange?

What do you need to know about Section 1031 exchanges?

To accomplish a Section 1031 exchange, there must be an exchange of properties. The simplest type of Section 1031 exchange is a simultaneous swap of one property for another. Deferred exchanges are more complex but allow flexibility. They allow you to dispose of property and subsequently acquire one or more other like-kind replacement properties.

How long does it take to replace a property in a 1031 exchange?

From the time of closing on the relinquished property, the investor has 45 days to nominate potential replacement properties and a total of 180 days from closing to acquire the replacement property. Identification requirements: The investor must identify the replacement property prior to midnight on the 45th day.

Is there an exception to IRC Section 1031?

IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange.