"Jaysteel9667" <jaysteel9667[at]aol.com> wrote

- quote -

If the Intermediary handles ALL the money, collects the
sales proceeds, pays off the existing mortgage, and holds
the remaining cash, yes.

- quote -

Then the Intermediary buys the replacement property.

- quote -

As long as the Intermediary handles all the money, yes.

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Nope. If it were, then some of the gains would be taxed.

You're not deferring the gains by replacing property that
costs what your gains were. You have to buy replacement
property that is ~equal in value~ to what you are selling.
The only way to do that is to buy something that isn't less
than what you are selling.

--
Paul A. Thomas, CPA, PC
Athens, Georgia
taxman[at]negia.net

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Jaysteel9667 wrote:

- quote -

No. You cannot sell the property. You have to exchange it
with the owner (including a qualified intermediary) of the
other property.

- quote -

If you set the deal up correctly either making a direct
exchange with the other property owner or by using a
qualified 3rd party intermediary, then yes.

- quote -

Yes. If you do, that difference in value is taxable gain
(but not more than your gain on the old property).

You need to consult with a local tax professional who
regularly assists clients in executing like kind exchanges
that qualify under IRC Section 1031. To better communicate
with that tax pro, you should obtain a copy of IRS
Publication 544, Sales and Other Dispositions of Assets
available at http://www.irs.gov/pub/irs-pdf/p544.pdf. Read
the section on "Nontaxable Exchanges" beginning on page 10.

Regards,
Bill
~~~~
Associate Professor of Accounting
Longwood University
Department of Accounting, Economics & Finance
http://www.longwood.edu/staff/wpbrown/
Opinions expressed by me are mine, not my employer's.

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How does financing on a property to be sold and the property
to be bought affect the 1031 exchange rules regarding the
receipt of cash? For example I sell a building for $500,000
and pay off the note at closing of $300,000 and deposit the
balance of $200,000 in the escrow account (no touching of
the money) will that be within the guidelines? I then buy a
property for $700,000 using the $200,000 in the escrow as
the down payment and financing the rest with another
mortgage. Does this fall withing the guidelines regarding no
receipt of cash? Also is it ever possible to do a 1031
exchange when the property being purchased is of lesser
value than the one being sold?.

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