• 1. Sales Price of Property sold$ + [Definition]

  The amount the property sells for. If estimating a price use the FMV (Fair Market Value) of the property.

• 2. Purchase Price of New Property bought $ + [Definition]

  This is the property which is replacing the property sold (the Like Kind Property).

• 3. Existing Mortgage on property sold $ + [Definition]

  The amount of the current mortgage on the property for sale.

• 4. New Mortgage on property bought $ + [Definition]

  The amount of the new mortgage assumed by seller, after the down payment -- which includes the proceeds transferred from the sale plus any additional money paid.

• 5. Expenses on property sold $ + [Definition]

  The commissions and all other expenses paid in connection with the sale of the property sold.

• 6. Expenses on property bought $ + [Definition]

  The fees and other charges paid to purchase a property. The closing costs.

• 7. Original cost of property sold $ + [Definition]

  The amount originally paid for the property, plus all expenses of the purchase.

• 8. Cost of improvements on property sold $ + [Definition]

  The cost of major additions to the property, which must be depreciated (i.e. a new roof, room, etc)--- but not repairs which are written off annually.

• 9. Depreciation taken on property sold $ + [Definition]

  The paper writeoff for wear and tear. This number will be found on your Tax Return.

Definitions

Exchange

In General an Exchange (known as a 1031 Exchange) is the sale of your property and then putting all of the money received into the purchase of a new Like Kind Property. By doing this you avoid reporting all of ar at least a portion of the taxable gain of the sale on your current tax return. In essence you Defer the gain by transferring it to your new property. The mechanics of this deferal is done by adjusting the Basis of the new property by the amount of the deferred gain. This is accomplished by subtracting the sale's deferred gain from the cost of the new property. For example if the cost of the new property is $300,000 and the deferred gain is $50,000, the adjusted basis of the new property is now $250,000.

Like kind

The same type or category of property by IRS definitions. For example, Real Estate (improved or unimproved) for Real Estate, NOT Real Estate for a Truck.

Boot

If the properties in the exchange are not of equal value the difference must be made up (by either the buyer or seller) by giving something of value to make up the difference. Usually this is Cash, but it could be anything of value (ie a Truck). This is called Boot & if received by the seller is Taxable in the year of sale.

In addition to these amounts, Mortgage relief is considered boot.

Mortgage relief

When the mortgage given up (Old mortgage) is greater than the mortgage assumed (New mortgage), the difference has the same effect as receiving cash and is considered Boot.

Original Basis

The amount originally paid for the property, plus all expenses of the purchase.

Adjusted basis

The Original Basis PLUS any Improvements, LESS all Depreciation, and LESS any Deferred Gain from a previous Exchange.

Exchange expenses

The sum of costs paid by the seller for both the sale of the Old property and the purchase of the New property --- the commissions and other charges paid to handle the transaction. These are only the fees, & do not include the prorations for Property taxes or Insurance, etc.

These expenses reduce taxable Boot.

Depreciation

A paper writeoff allowed by the IRS for assumed wear and tear of the property. It is determined by IRS Tables for specific types of property. Depreciation reduces the basis of a property.

Total gain on sale

The difference between the sales price and the adjusted basis, reduced by the cost of selling the property.