How much replacement property must a taxpayer purchase to fully defer capital gains taxes?
In order to obtain the benefits of a fully deferred exchange, a taxpayer must not only use all its net proceeds held by the intermediary towards the purchase of replacement property, but it must also purchase property or properties with at least the same value seller the relinquished property. As a result, a taxpayer must replace any debt paid off at the closing of the relinquished property with new debt or additional equity in purchasing the replacement property. Any debt not so replaced will be considered boot, subject to tax liability.
