Many taxpayers ask if they can take out any cash during the 1031 exchange process. In this article, we are going to talk about whether or not you can pocket cash at any point during a 1031 exchange.
Taxable Boot
If you pocket any cash at closing or during any point during your 1031 exchange, that would be considered taxable “boot.” You can do it if you wish, but you would have to pay capital gains taxes on that cash boot. Keep your hands off the net proceeds throughout the process to defer 100% of your gains.
Partial Exchange
In most situations, the goal of a 1031 exchange is 100% tax deferral. However, there are some instances in which a partial exchange might be acceptable or even preferable. For example, if you have prior loss carryovers, you may be able to offset a partial recognition of gains from taking some cash as taxable boot or from buying down in value on the replacement property purchase.
Find a 1031 Exchange Professional
Find a 1031 exchange professional near you and get your like-kind exchange off the ground today. At CPEC1031, LLC we have over two decades of experience facilitating 1031 exchanges of all shapes and sizes for clients in Minnesota and across the country. Our qualified intermediaries are here to help you through the entire exchange process, from start to finish. We can answer all your questions, help you find suitable replacement property, and make sure you are meeting all the requirements set out by section 1031 of the IRC. Contact us today to learn more!
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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