1. What is 1031 Exchange Capital Gain?

The capital gain in a 1031 exchange represents the taxable profit from the sale of investment property, calculated as the difference between the sale price and the adjusted basis of the property.

2. How Does the Calculator Work?

The calculator uses the capital gain formula:

Where:

• \( Sale \) — Sale price of the property ($)
• \( Adjusted\ Basis \) — Original cost plus improvements minus depreciation ($)

Explanation: This calculation determines the potential taxable gain that could be deferred through a 1031 exchange.

3. Importance of Capital Gain Calculation

Details: Accurate capital gain calculation is essential for proper tax planning, determining exchange requirements, and ensuring compliance with IRS regulations for 1031 exchanges.

4. Using the Calculator

Tips: Enter the sale price and adjusted basis in dollars. Both values must be non-negative numbers. The result shows the calculated capital gain.

5. Frequently Asked Questions (FAQ)

Q1: What is included in adjusted basis?
A: Adjusted basis includes the original purchase price plus capital improvements, minus any depreciation taken over the ownership period.

Q2: How does 1031 exchange defer capital gains tax?
A: A 1031 exchange allows investors to defer capital gains taxes by reinvesting the proceeds from the sale into a like-kind property.

Q3: What are the time limits for a 1031 exchange?
A: Investors have 45 days to identify potential replacement properties and 180 days to complete the acquisition after the sale.

Q4: Are there any properties that don't qualify for 1031 exchange?
A: Primary residences, inventory, stocks, bonds, and partnership interests generally do not qualify for 1031 exchange treatment.

Q5: What happens if the replacement property costs less than the sold property?
A: The difference between the sale price and replacement cost (boot) may be subject to capital gains tax.