1031 Exchange Cost Basis Calculator

Basis Formula:

\[ New Basis = Old Basis + Gain Deferred - Boot \]

New Basis:

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1. What Is The 1031 Exchange Cost Basis Calculator?

The 1031 Exchange Cost Basis Calculator helps determine the new cost basis of replacement property in a like-kind exchange under IRS Section 1031. It calculates the adjusted basis after accounting for deferred gains and boot received.

2. How Does The Calculator Work?

The calculator uses the basis formula:

\[ New Basis = Old Basis + Gain Deferred - Boot \]

Where:

\( Old Basis \) — Original cost basis of the relinquished property
\( Gain Deferred \) — Capital gains deferred through the exchange
\( Boot \) — Non-like-kind property or cash received in the exchange

Explanation: The formula adjusts the original basis by adding deferred gains and subtracting any boot received, resulting in the new basis for the replacement property.

3. Importance Of Basis Calculation

Details: Accurate basis calculation is essential for determining future depreciation, capital gains taxes upon eventual sale, and compliance with IRS regulations for like-kind exchanges.

4. Using The Calculator

Tips: Enter the old basis in dollars, the amount of gain deferred in dollars, and any boot received in dollars. All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a 1031 exchange?
A: A 1031 exchange allows investors to defer capital gains taxes by reinvesting proceeds from the sale of investment property into like-kind replacement property.

Q2: What constitutes "boot" in a 1031 exchange?
A: Boot refers to any non-like-kind property or cash received during the exchange, which may be subject to immediate taxation.

Q3: Why is the new basis important?
A: The new basis determines the amount of depreciation you can claim on the replacement property and affects capital gains calculations when the property is eventually sold.

Q4: Can the new basis be negative?
A: No, the new basis should not be negative. If calculations show a negative result, review your inputs for accuracy.

Q5: Are there time limits for completing a 1031 exchange?
A: Yes, taxpayers have 45 days to identify potential replacement properties and 180 days to complete the acquisition after selling the relinquished property.