How can I defer the maximum amount of capital gains tax in a 1031 exchange?
The Main Rule In order to have a fully tax deferred exchange; the replacement property purchased must be equal-or-up in fair market value to the relinquished property being sold. That means you must use the entire net proceeds from the relinquished property to purchase the replacement property. You must also replace any mortgage paid off at the sale of the relinquished property with an equal-or-greater mortgage on the replacement property. If not you may incur “Mortgage” boot. The following general guidelines must be used in order for taxpayers to realize their maximum taxable gains: • The value of the replacement property must be equal to or greater than the value of the relinquished property. • The equity in the replacement property must be equal to or greater than the equity in the relinquished property. • The debt on the replacement property must be equal to or greater than the debt on the relinquished property. • All of the net proceeds from the sale of the relinquished property m
