How do I calculate capital gains for the sale of a residence converted from a 1031 exchange?

August 12, 2011

From:  Karlay
Date:  16 Jun 2009

How do I calculate the capital gains for the sale of my residence, which was converted from a 1031 exchange in 2002?

Thank you.

Answer

Date:  10 Jul 2009

Hello Karlay,

I suggest that you get professional help. The tax basis (cost to compute taxable income or loss) is reduced by the deferred income from the exchange. Since the property couldn’t be personal-use property to qualify for an exchange, you might have some taxable income not eligible for exclusion relating to depreciation claimed for the previous residence and your current residence before conversion.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.