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    1031

    Something does not look right to me with this exchange. Would someone take a look and let me know if I'm on the right track or not?

    Old property:
    Basis - $100,000 + 11,124 exchange costs = $111,124 (no mortgage)
    Sold for $325,000

    Replacement property:
    Cost - $519,000 + 5,638 closing costs = $524,638
    New mortgage - $194,000

    I'm coming up with a deferred gain of $188,514 and basis of new property of $336,124.

    Does this look correct and is this new basis ($336,124), the new basis for depreciation?

    Thank you, Dennis
    Last edited by DTS; 03-06-2006, 10:41 AM. Reason: info

    #2
    1031

    CFS TaxTools has a calculator just for this situation.

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      #3
      in the right place

      The main thing I see wrong is the mention of a mortgage in the first and last lines. Mortgage is completely, totally, unredeemably irrelevant.

      I also don't much like the math. When I subtract 111 from 325 I don't get 188. But in the end our numbers are close. My quick-calc of the new basis is 310,762.

      I really appreciate you not using the words "sold" or "bought" anywhere. It's one of my personal prejudices, and I see your heart is in the right place.

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        #4
        1031

        The main thing I see wrong is the mention of a mortgage in the first and last lines. Mortgage is completely, totally, unredeemably irrelevant.
        Mortgage and cash are unlike property: so you must figure mortgage give up and received when doing your 1031 calculation.

        I come up with a base closer to $310,762
        Deferred gain of $213,876

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          #5
          the mortgage is irrelevant

          >>Mortgage and cash are unlike property<<

          No, the mortgage is irrelevant. In the old days a buyer might assume a mortgage, but nowadays lenders always enforce the due-on-sale clause. The exchangor does not give up a mortgage, he pays it off. And he doesn't receive a mortgage, he signs up for a new one.

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            #6
            1031

            Thank you all for your help.

            I went into CFS and redid the numbers and came up with the same totals you all did.

            Thanks, again.
            Dennis

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