1031 exchange properties are made up of real and personal property held for productive use in a trade, business or investment. When sold, 1031 exchange properties trigger federal and potential state capital gains and recaptured depreciation taxes that can amount to 40 percent of the sales price. A 1031 exchange allows for the individual, corporation or partnership, either domestic or foreign to defer these taxes given a replacement 1031 exchange property is acquired within 180 calendar days post-closing on the old real or personal property of equal or greater value.
Capital Gains Example
A commercial building in Indianapolis, Indiana is acquired for $160,000 in 1982. Improvements of $300,000 are made over the years to renovate the forty apartments and make leasehold improvements for a restaurant and retail store on the first floor. The building is sold for $5,500,000. The estimated recognized gain is determined by the following:
Original purchase price + Improvements – Depreciation Taken = Adjusted Basis
$160,000 + $300,000 -$323,076 = $136,924
Sales Price – Adjusted Basis – Selling Costs = Realized Gain
$5,500,000 – $136,924 – $200,000 = $5,163,076
Recaptured Depreciation (25%) = $80,769
Federal Capital Gain (15%) = $726,000
Indiana State Capital Gain (3.4%) = $175,545
Estimated Recognized Gain or Tax Due = $982,314
The 1031 exchange allows the owner to defer the tax due in an indefinite interest free loan until the replacement property(s) of equal or greater value are sold.
Posted 1031 Exchange Properties
Taxpayers post their 1031 exchange properties on the Atlas 1031 web site. Posting the properties is free. If you would like to post your property, please send an email to andgus@atlas1031.com with up to a 300 word description, contact, cell and email address, along with the asking price. Please include a picture of the property. Examples of 1031 exchange properties include:
- Timberland
- Aircraft
- Vacation Properties
- Apartments
- Ranches and farms
- Artwork
- Collectibles including vintage cars and musical instruments
To view and learn more how to post real or personal property, click on the button below.
