I have a property, bought for $182,500, will sell for $300,000.
Net Gain after all closing costs,etc = $100,000.
Total equity amount (including down payment) = $50k+100k = 150K
I want to do a 1031 exchange for another property:
Price $1.1Million…using the $150k equity from the last one (through a 1031 exchange to defer paying taxes on the $100k gain).
I plan on flipping the $1.1Million property for $1.4M in about 30 days after purchasing it (I know I can do this - I got a great deal).
How will my proceeds be taxed?
i.e. what will my cost basis for my new property be?
Since I am selling it in 30 days, what is the tax rate? I am in CA
How much tax will I pay?
Is there a better way to do this?
Most 1031 exchange companies will tell you that you need to hold the property at least a year before selling it. Your flip of the $1.1 million dollar property will be taxable and even the $100,000 profit from the first property you sell. I do not know the tax rates and it also depends if you are doing this personally or thru a corp or LLC etc.
If you stay with this plan the first 1031 is a waste of time and money. You may be able to do a 1031 with the second property sale but you will need an aggressive 1031 company to do it. If the IRS challenges the 1 year (sort of rule of thumb) you may need to pay the taxes due anyway.
There may be other creative ways to do the deal like refinance the new property instead of selling. Maybe the new buyer you have will do a participating loan or some other creative venture where it will not be considered a sale until you can exchange into another deal.