Executive 1031 Exchange Services

Sample Exchange

 

Home
Background
Online Order
Services
New Legislation
Basic Exchange
Common Questions
Definitions
Sample Exchange
Exchange Links
Properties
Search

Sample Exchange

To illustrate the benefits of exchanging properties versus selling outright, the following example computes the capital gains tax due on a typical sale. The variables used are as follows:

Property - Investment property purchased 5 years ago.

Purchase Price -

$220,000

Depreciation taken -

$21,818

Sales Price -

$550,000

For this example, we will use the new 15% tax rate on the gain and a 25% tax rate on depreciation taken.

 

The calculations are as follows.

Direct Sale

1031 Exchange

Sale Price

$550,000

$550,000

Less Selling Costs

($38,500)

($38,500)

Adjusted Sale Price

$511,500

$511,500

Less Basis

($220,000)

($220,000)

Taxable Gain

$291,500

$291,500

Federal Tax on Gain @ 15%

$43,725

Deferred

Tax on Depreciation @ 25%

$5,455

Deferred

State Tax on Initial Gain @ 9%

$26,235

Deferred

Capital Gains Tax Due Now

$75,415

$0

 

In this example, the $75,415.00 paid in taxes can be saved by completing a 1031 Exchange with Executive 1031 Exchange Services. The proceeds of the sale are invested in the replacement property and the capital gains taxes are deferred indefinitely.