1031 Real Estate Exchange - Capital Gains
"Taxes are Paid on Capital Gain, not Equity or Profit."
It is possible to have little or no equity and still owe tax. Capital gain is arrived at by subtracting the adjusted basis from the adjusted sale price. The adjusted sale price is the gross sale price minus standard transaction costs. There are a number of components used to arrive at the adjusted basis. First, establish the original basis (usually the original purchase price). Next, add to this figure all improvements made to the property which were not expensed. Then, subtract all depreciation taken over the period of ownership.
To determine the estimated capital gain, subtract the adjusted basis from the sale price. Next, subtract the transaction costs (commissions, fees, etc.) to determine the capital gain. Finally, multiply the capital gain by your combined tax rate (Federal and State) to determine your estimated capital gains tax.
Summit County 1031 real estate exchange index