rbynaker
Level 13
07-09-2020
01:40 PM
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Yeah, the whole concept is based on "trading up". If I sell a property and have to pay taxes on it, then I don't have as much money to invest in a comparable property, so the taxes are forcing me to "trade down" to a property with a lesser value. To fix this, Congress created 1031 which allows me to swap a property for something comparable and defer the taxes until later, keeping the money in the real estate market.
In this case though, there's $800K in the bank, so plenty of money available to pay taxes. I'm surprised the 1031 intermediary didn't mention that an exchange wasn't necessary.