Capital Gains 1031 Exchange Tax Planning – Calculate Capital Gains, Minimize Taxable Boot!

You can minimize gain and lower tax burdens by accounting for sale expenses and exchange fees. By minimizing cash received and maximizing cash spent, you can minimize your deferred gain so you can owe less in taxes.

To minimize cash received on your sold property, you should deduct all closing costs and commissions paid. Take the Contract Sales Price (line 401), subtract the loan paid off (line 504-505), and subtract all sale expenses; like Broker’s Commission (line 703), Title Charges (lines 1100-1110), Transfer Charges (lines 1201-1205), and Additional Settlement Charges (lines 1301-1302). Also subtract the 1031 exchange fee and any loans you may have carried back.

For tax purposes, this will give you the cash received.

To maximize cash spent on your purchased property, account for purchase expenses, exchange fees, and loan costs. Take the Contract Sales Price (line 101) and subtract the loan acquired (lines 202-203). Then add purchase expenses, like Title Charges (lines 1100-1110), Transfer Charges (lines 1201-1205), and Additional Settlement Charges (lines 1301-1302). Also add the 1031 exchange fee and costs for loans you’ve acquired.

For tax purposes, this will give you the cash spent.

This can get to be an intricate process, and you may have difficulty reporting this information on IRS Form 8824 for your tax return.

For a more detailed explanation and simple guided assistance, property management software maker TReXGlobal has software to help you calculate your 1031 exchange tax!

This is a blog post for Real Estate Professionals, Investors, Landlord, Property Manager, and Property Management Companies. Capital Gains 1031 Exchange Tax Planning – Calculate Capital Gains, Minimize Taxable Boot! is brought to you by SimplifyEm Pay Rent Online and Property Management Software

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