1031s And Capital Gains
Okay, I may be completely off my rocker and not understanding things as well as I should. Which is why I am asking.
Question 1)
We are moving to GA. We have 2 rental properties (each owned for over a year, nearly 2), one worth say, 15,000 more than we owe, the other more like 25,000 more than we owe. In a 1031, can we split that equity to buy a total of four or five rentals in GA? I know it will be tricky to close on so many properties within 90 days of the sale of the 2 in FL.
Question 2)
What happens if a property in a 1031 isn't closed on that fast? Obviously I DON'T want that to happen but what does happen?
Question 3)
Our home - completely different taxing. Owned for 4 years come June, so not at the 5 year mark yet. Worth 35,000 more than mortgage. As I understand it, so long as the home we purchase (within 2 years) in GA is worth more than the total selling cost of our home here, there is no gains tax. True?
Question 4)
Are there other taxes that apply to the above that I am unaware of?
and an off-topic question to anyone in GA - is it hard to get insurance on rental property there? Been really tough here, as we invest in fixer-uppers, so we buy cheap, spend 10G and put our blood sweat and tears into them.
Thanks!
Grey.
Thank you!
It is good to know that we can take the profits from our own home, and use, say, a portion as a down payment on our new home, and the remainder as fix-up money for the rentals we purchased in the 1031 exchange,
Also a relief to know of the 180 days to close - gives us more time to get financing/insurance out of the way. Identifying property within 45 days should not be a problem. So I feel less stressed.
Thanks so much for the reply!
Grey
1) Yes, you can split the equity into as many properties as you like. It gets complicated during the identification and acquisition stages, but can be done. You also need to be aware that Georgia is one of three states that does not complete follow Section 1031. You can buy into Georgia with no problem, but when you go to sell and do another 1031 exchange with the Georgian properties you can only defer your state income taxes if you acquire in Georgia again. If you aquire outside of Georgia you will defer your Federal, but not state, income taxes from the capital gain.
2) You have the time periods wrong. You have 45 calendar days to identify prospective replacement properties from the date that your sale escrow closes, and you have 180 calendar days to complete and close on the acquisitions of your replacement properties from the date that your sale escrow closes. It is a total of 180 calendar days (not 45 plus 180). If you are not able to complete and close on one of the acquisitions before the 180th day then the portion of the 1031 exchange funds left over become taxable, unless you have other properties that you can still aquire on your identification list.
3) Not correct. The law has changed here. Pursuant to Section 121 of the Internal Revenue Code, you only have to live in your primary residence for 24 months in order to qualify for the tax fee exemption of $250,000 for a single person and $500,000 for a married couple. You have lived there for four years, so you would certainly qualify for that. The two year reinvestment that you mentioned WAS Section 1034 (a 1034 exchange) but was replaced by Section 121 (a 121 exclusion).
Let me know if any of this was not clear.
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