To avoid paying ANY tax, how much must be spent on replacement property?
EQUAL OR GREATER PROPERTY VALUE: If you sell a property for $500,000, and you pay $35,000 in commissions and closing costs, the “adjusted value” = $465,000. To avoid paying ANY tax, you must purchase property of this value or greater. DEBT RELIEF MUST BE REPLACED: If a loan is paid off when you sell, the IRS requires you take on equal or greater debt when you purchase replacement property. You may replace some or all of the debt relief with “out of pocket” cash. CASH MUST BE UTILIZED: All cash proceeds from your sale(s) must be used in your purchase(s) to avoid paying any taxes. IMPORTANT REMINDER: You must balance all 3 items to avoid paying ANY tax – Adjusted Property Value, Debt Relief and Cash.