I bought a house for a rental 1.5 years ago with a 1031 that is appraised at 350k, I just took a loan out on it for 200k. If I sell this house this month, how much do I have to exhange. does the sale of the house pay the loan off and keep the money have only to spend 150k or do I need to spend what the house is worth?
2006-07-08 12:22:05 · 2 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
You will still have to do a capital gains calculation based on what you paid for the original property, plus anything you did to that property and this one that would increase your cost basis (ie. repairs or upgrades), minus depreciation.
The fact you have a loan out doesn't change your cost basis, though the interest on the loan is tax-deductible. You will have to pay off the loan when you sell (as it is secured against the house).
The presence of the loan doesn't change your cost basis from a tax standpoint, you will still have to exchange straight across or upgrade to avoid paying taxes.
Ask your tax accountant for specifics.
2006-07-08 12:39:16 · answer #1 · answered by Lori A 6 · 0⤊ 0⤋
Do another 1031 exchange- transfer the loan to the new property.
2006-07-09 00:23:35 · answer #2 · answered by besttaxexpert 2 · 0⤊ 0⤋