Thanks for checking out the Real Estate Today podcast. We have a special guest in the studio today, Megan McMahon and we’re talking taxes.
Bobs Blogcast 58 – Megan McMann – 1031 Exchanges and Taxes
Bob: I’m Bob Nelson, Real Estate Investment Broker with Pac West Real Estate Investments. Joining me today is Megan McMahon. Megan manages the Cascade Exchange Services, which is a branch of Cascade Escrow, Cascade Title of Eugene. Megan’s also a CPA and exchange facilitator with a CPA designation, which is outstanding. Megan, thanks for joining me today.
Megan: Thanks for having me.
Bob: Let’s assume for a moment that I have just received an offer that’s too good to be true on a property I no longer really wish to own to begin with. I’ve pretty much decided I want to sell and I’ve now started to discover the magnitude of my tax problem if I simply sell. I want to learn more about an exchange. What would you suggest I do immediately? I’ve received the offer, it looks like it’s going to work, and I want to sell. Where do I go?
Megan: The first call would be to your CPA to make sure that your tax situation is what you think it is and that an exchange is right for you.
Bob: Okay. Okay.
Megan: Once they’ve given that their blessing, then you would come to me and I would probably set up an appointment with you to just sit down and go over the rules of the exchange to make sure that you understand what you’re in for. What that means is that you got this great offer and you have to be prepared to go forward and purchase. You have to go even or up from whatever you sold for and so you have to be able to do that.
Bob: Something that’s equal value or more expensive than the thing I sold. Okay.
Megan: Exactly. You have to transfer all of your equity from the relinquished property to your replacement property, so any cash that comes out of the transaction has to go into the new transaction.
Bob: What happens if I wanted to pull out $100,000.00 just because I wanted to have some money in my savings account for once? Does that kill my entire exchange?
Megan: It does not, you would just be taxed on that amount.
Bob: Okay.
Megan: I always tell my clients that you’re taxed on anything that you put in your pocket.
Bob: Okay, that’s perfect. Okay.
Megan: Then you also have to be prepared for the timelines. It goes pretty quick once you’re into it. You have 45 days from your date of sale to identify what you’d like to purchase and you have 180 days to acquire. That seems like a long time when you’re just sitting here thinking about numbers, but once you’re into it that really flies and you have to be ready to jump as soon as you close.
Bob: Okay, now that’s excellent advice because most people just say, “Well gosh, I’ve got a month and a half, what could go wrong?” Everything could go wrong. You better start racing. Thanks for joining me today.
Megan: Thank you.
Bob: I’m Bob Nelson, Real Estate Investment Broker with Pac West Real Estate Investments.
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