Pulling Out Taxfree Booty From Your 1031 Exchange

Dated: 05/25/2015

Views: 742

Can I pull out some tax-free booty from my 1031 Exchange?

Section 1031 of the internal revenue code can be married to section 121 allowing an exchangor to take up to $250,000, $500,000 for married couples, in tax-free profits off the top of a 1031 exchange sale if the exchangor has served 187 days a year (more than half the year) for 2 of the preceding 5 years in the property, claiming it has his primary residence.

Example: Investor purchases a triplex for $600,000, gets married, and watches his investment more than triple over the years. The investor is preparing for retirement and decides to exchange the triplex into a NNN Leased Investment to increase cash flow, depreciation write-offs, and ease of management. Investor moves into one of the units and keeps the other two units rented out. After two years, the investor sells the property for $2,100,000. Normally the sale would come with at least a $375,000 tax bite ($1,500,000 X 25% Capital Gains) and closer to $500,000 if re-captured depreciation were factored in; however the investor purchases a $1,400,000 NNN Leased Investment via a 1031 exchange and pockets the other $700,000 tax free under the homeowner's deduction section 121 (assuming no re-capture). Had the investor just pulled all the way out, and not used protection from section 1031 and 121 of the internal revenue chode, he would have had to write a check to the IRS for close to $500,000. That's some expensive booty.

About the author: Richard L McKinney Realtor, Local Real Estate Expert & Nice Guy

I’d love to hear from you. 

What do you think about this topic?

Richard L. McKinney P.A.

Atlantic Shores Realty Executives

Selling the Treasure Coast - Port St Lucie, Fort Pierce, Stuart, Jensen Beach, Palm City and Hutchinson Island --- Homes, Condos, Townhomes & Land.

Sell Phone:  (772) 370-8631

email: StLucieRealtor@aol.com 


 Visit me on the web .... 

 Port St Lucie Real Estate, Homes,Condos,Townhomes and land for sale in Port Saint Lucie Florida..

 www.TreasureCoastMLS.com

StLucieRealEstate.net

 

Please connect with me on the following:

On Facebook - The Treasure Coast Real Estate ReportThe Port St Lucie Real Estate BlogConnect with me on Google PlusInstagramConnect on LinkedInFind me on Pinterest

  My goal is to be your Realtor for LIFE. If you or someone you know has a real estate question, purchase or

Blog author image

Richard McKinney

I have been selling real estate in South Florida since 1998 with a specialization in homes, town homes and condos in St Lucie and Martin Counties. My service areas include the cities of Port Saint Luc....

Want to Advertise on this Site?

Latest Blog Posts

Home Inspection Checklist

A home inspection is a critical

Read More

Trader Joes Or Ice Rink For PSL

Sky's the limit in Southern GroveSo. Does Port St. Lucie need a water park? How about an amphitheater, a public performance space? Another movie theater? A Trader Joe’s? Or what about some

Read More

HOW DO I BUY A HOME DAVE Feb 5 2020 65623 1

I get this question all the time! Dave How do I buy a home? There is not a single person on this planet who knows everything! There are no STUPID QUESTIONS. SO DON'T be afraid to ASK!Well it's

Read More

2660 Riverview Court Vero Beach FL 32963 Homesite

Build your dream home in the serene, riverfront community of Orchid Estates.   Private gated community with low fees features gated access and pristine old Florida oak lines streets and

Read More