Discussion:Basis of property in like-kind exchange

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Discussion Forum Index --> Tax Questions --> Basis of property in like-kind exchange

Jeff01 (talk|edits) said:

4 January 2007
The following transaction initially qualified for a §1031 Like-Kind Exchange and subsequent gain deferral. Property C was sold outside of the rules for §1031 and gain must be calculated.

3/1/2003: Property A purchased for $100,000 in 2000 3/1/2005: Property A relinquished for properties B and C;

           Property A sales price:    $140,000
           Property B purchase price: $ 85,000
           Property C purchase price: $ 55,000

9/1/2006: Property C sold for $95,000

What is the basis of Property C for calculating the gain? I cannot find anything that states if it is $55,000 or that it should proportional to property A like so:

$55,000 / $140,000 = 39.29%

39% * $100,000 = $39,290


WesR (talk|edits) said:

4 January 2007
Hi without confirming I would have prorated A's carryover cost basis as you did between B and C. It definitely is not 55K. bye

Riley2 (talk|edits) said:

4 January 2007
If Property C is nonqualifying property, then the FMV of that property should be treated as boot on the original exchange, and the basis would be $55,000.

KatieJ (talk|edits) said:

4 January 2007
The OP stated that the initial exchange qualified under Sec 1031. Therefore Property C must have been qualifying property.

The basis must be allocated between the parcels. See Rev. Rul. 68-36, 1968-1 CB 357.

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