{"id":27287,"date":"2019-10-15T16:24:44","date_gmt":"2019-10-15T20:24:44","guid":{"rendered":"https:\/\/www.affiliated1031.com\/two-properties-exchanged-for-one-property-of-lesser-value\/"},"modified":"2023-06-29T12:09:36","modified_gmt":"2023-06-29T16:09:36","slug":"two-properties-exchanged-for-one-property-of-lesser-value","status":"publish","type":"post","link":"https:\/\/www.affiliated1031.com\/es\/two-properties-exchanged-for-one-property-of-lesser-value\/","title":{"rendered":"Two Properties Exchanged for One Property of Lesser Value"},"content":{"rendered":"<div  class=\"tatsu-h6utlclew15dnnk1 tatsu-section  tatsu-bg-overlay   tatsu-clearfix\" data-title=\"\"  data-headerscheme=\"background--dark\"><div class='tatsu-section-pad clearfix' data-padding='{\"d\":\"15px 0px 15px 0px\"}' data-padding-top='15px'><div class=\"tatsu-row-wrap  tatsu-wrap tatsu-row-one-col tatsu-row-has-one-cols tatsu-medium-gutter tatsu-reg-cols  tatsu-clearfix tatsu-h6utlclexf6h9bfk\" ><div  class=\"tatsu-row \" ><div  class=\"tatsu-column  tatsu-bg-overlay tatsu-one-col tatsu-column-image-none tatsu-column-effect-none  tatsu-h6utlcleyt1fs2gq\"  data-parallax-speed=\"0\" style=\"\"><div class=\"tatsu-column-inner \" ><div class=\"tatsu-column-pad-wrap\"><div class=\"tatsu-column-pad\" ><div  class=\"tatsu-module tatsu-text-block-wrap tatsu-h6utlclf02ce921t  \"><div class=\"tatsu-text-inner tatsu-align-center  clearfix\" ><style>.tatsu-h6utlclf02ce921t.tatsu-text-block-wrap .tatsu-text-inner{width: 100%;text-align: left;}<\/style>\n<h2>This Example of a South Florida Transaction Illustrates How 1031 Works to Create Generational Wealth<\/h2>\n<h3>The Scenario &#8211; Two Properties are Sold &#8211; One New Property is Purchased.<\/h3>\n<p>A very bright client of ours purchased two different properties many years ago.<\/p>\n<p>These two properties were in a developing area of Miami-Dade County.\u00a0 Additionally, both of these lots had neighboring properties that were raw acreage.<\/p>\n<p>Both properties are now within a few blocks of a major shopping center, so they have increased considerably in value.\u00a0 Our client plans to continue investing and use the IRS <a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/like-kind-exchanes-real-estate-tax-tips\"><span style=\"font-weight: 400;\">\u00a0Section 1031 Exchange<\/span><\/a><span style=\"font-weight: 400;\"> Rules to defer taxes to leverage her gains toward additional commercial property investments.<\/span><\/p>\n<p>She transacts two different Section 1031 exchanges.\u00a0 One for the $2.8 million to purchaser # 1 on lot # 1.\u00a0 The other property is transacted for $2.1 million to purchaser # 2 on Lot 2.\u00a0 She has now done two different Relinquished Property 1031 transactions.\u00a0 Together she has sold properties totaling $4.9 million.<\/p>\n<p>In this scenario, our client used the proceeds from both of her sales (1031 transactions totaling $4.9 million) to purchase one\u00a0 Replacement Property for $4.7 million, leaving her with a surplus of $200,000.<\/p>\n<h3>1031 Exchange Basic Rules That Apply In This Scenario<\/h3>\n<p>Here are three important rules that apply in this case.\u00a0 For a full overview of 1031 Exchange rules and critical timelines, <a href=\"https:\/\/www.affiliated1031.com\/es\/understanding-1031\/\">visit this page from Affiliated1031.com.<\/a><\/p>\n<p><strong>Property Value<\/strong><\/p>\n<p>You must purchase a property of equal or greater value to the property sold or pay tax on the difference.<\/p>\n<p><strong>Exchange Values<\/strong><\/p>\n<p>You must use all of the cash proceeds from the sale of your Relinquished Property toward the purchase of Replacement Property or pay tax on the difference.<\/p>\n<p>If you offer seller financing on your Relinquished Property, you may be subject to tax as the principal is repaid.<\/p>\n<p><strong>Qualified Intermediary<\/strong><\/p>\n<p>To qualify for safe harbor tax deferral, sale proceeds must be held by a Qualified Intermediary between the sale of the Relinquished Property and the purchase of the Replacement Property.<\/p>\n<h3>Here&#8217;s how the client deferred $900,000 in taxes.<\/h3>\n<p>The client completed two separate 1031 transactions, and Affiliated 1031, LLC as her Qualified Intermediary, received approximately $4.9 million into its Trust Account.\u00a0 BUT, she only obtained $4.7 million of Replacement Property.<\/p>\n<p>For this example, let\u2019s assume she had no costs on the sale and that she had originally paid $400,000.00 total for both Relinquished (sold) properties.\u00a0 That means that on paper, she had a $4.5 million total profit ($4.9 million less $400,000 = $4.5 million).<\/p>\n<p>The 1031 Exchange rules state that the taxpayer must purchase Replacement Property of equal value or more if they want to defer <strong>all <\/strong>of their profit.\u00a0 In this case, she was $200,000 short on the purchase (Replacement) side of the 1031 transactions as she only purchased $4.7 Million worth of Replacement Property.<\/p>\n<p>She must pay the long-term capital gains tax on the $200,000.00.\u00a0 As the lots she owned were undeveloped, there was no depreciation recapture tax, so there was nothing to depreciate.\u00a0 The tax on $200,000.00 will be $40,000.00.<\/p>\n<p>BUT, because she did her two Section 1031 Tax Deferred Exchanges,<strong> she has deferred $900,000.00 in taxes, which she used\/leveraged towards the replacement properties.<\/strong><\/p>\n<p>Pretty good result!<\/p>\n<p>Also note that the Exchanger can combine two or more exchanges and purchase one Replacement Property, as long as all of the timelines (45-day rule and 180-day rule) are complied with.<\/p>\n<p><b>\u00a0You can view the critical timeline requirements<\/b><a href=\"https:\/\/www.affiliated1031.com\/es\/1031-exchange-timeline\/\"> <span style=\"font-weight: 400;\">here at the Affiliated 1031 Exchange website.<\/span><\/a><\/p>\n<p>At Affiliated 1031, we always recommend that the taxpayer consults with their tax and\/or legal counsel on all matters dealing with the Internal Revenue Service.<\/p>\n<p>Are you ready to get started with a 1031 Exchange? <b>Call us today at 877.873.1031<\/b>.\u00a0 Have 1031 questions?\u00a0 Submit your <a href=\"https:\/\/www.affiliated1031.com\/es\/contact-us\/\">1031 questions here<\/a>, and we&#8217;ll reply ASAP.<\/p>\n<p><strong>AFFILIATED 1031, LLC.<\/strong><\/p>\n<p>Ricky Guerrero, Esq., CEO, rg@affiliated1031.com<br \/>Steven E. Gurian, Esq., LL.M, President, sg@affiliated1031.com<\/p>\n<p><b>Se habla espa\u00f1ol<\/b><\/p>\n<\/div><\/div><\/div><\/div><div class = \"tatsu-column-bg-image-wrap\"><div class = \"tatsu-column-bg-image tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-column-overlay tatsu-animate-none\" ><\/div><\/div><style>.tatsu-row > .tatsu-h6utlcleyt1fs2gq.tatsu-column{width: 100%;}.tatsu-h6utlcleyt1fs2gq.tatsu-column > .tatsu-column-inner > .tatsu-column-overlay{mix-blend-mode: normal;}.tatsu-h6utlcleyt1fs2gq > .tatsu-column-inner > .tatsu-top-divider{z-index: 9999;}.tatsu-h6utlcleyt1fs2gq > .tatsu-column-inner > .tatsu-bottom-divider{z-index: 9999;}.tatsu-h6utlcleyt1fs2gq > .tatsu-column-inner > .tatsu-left-divider{z-index: 9999;}.tatsu-h6utlcleyt1fs2gq > .tatsu-column-inner > .tatsu-right-divider{z-index: 9999;}<\/style><\/div><\/div><\/div><\/div><div class=\"tatsu-section-background-wrap\"><div class = \"tatsu-section-background tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-section-overlay\"><\/div><style>.tatsu-h6utlclew15dnnk1 .tatsu-section-pad{padding: 15px 0px 15px 0px;}.tatsu-h6utlclew15dnnk1 > .tatsu-bottom-divider{z-index: 9999;}.tatsu-h6utlclew15dnnk1 > .tatsu-top-divider{z-index: 9999;}.tatsu-h6utlclew15dnnk1 .tatsu-section-overlay{mix-blend-mode: normal;}<\/style><\/div>\n","protected":false},"excerpt":{"rendered":"<p>FACTS&#8211;A very bright client of ours purchased two different properties a number of years ago.\u00a0 These two properties were in a developing area of Miami-Dade County.<\/p>\n<div><a href=\"https:\/\/www.affiliated1031.com\/es\/two-properties-exchanged-for-one-property-of-lesser-value\/\" class=\"exp-read-more exp-read-more-underlined\">Read More<\/a><\/div>\n","protected":false},"author":1,"featured_media":26946,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","footnotes":""},"categories":[64],"tags":[58,74,75,62,76,61],"class_list":["post-27287","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-liberty1031-exchange-case-studies-es","tag-1031-exchange-es","tag-1031-exchange-rules-es","tag-investment-property-es","tag-qualified-intermediary-es","tag-reverse-exchange-es","tag-tax-deferral-es"],"_links":{"self":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27287","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/comments?post=27287"}],"version-history":[{"count":9,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27287\/revisions"}],"predecessor-version":[{"id":27453,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/posts\/27287\/revisions\/27453"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/media\/26946"}],"wp:attachment":[{"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/media?parent=27287"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/categories?post=27287"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.affiliated1031.com\/es\/wp-json\/wp\/v2\/tags?post=27287"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}