Question:
“I inherited a condo from my dad last year and want to sell it and buy a rental property here. Should I do a 1031 tax deferred exchange?”
Answer:
[A 1031 exchange allows someone to sell an investment property, reinvest the proceeds in a new property, and defer some or all tax on the gain. For more info, call me at 858-457-KENT.]
When someone inherits a property, they usually get what’s called a “full step up in basis.” That means, when figuring out your gain, the IRS treats it as though you bought it for the value at the time you inherited it.
For more info on stepped up basis, one site you might want to see is http://investopedia.com/terms/s/stepupinbasis.asp.
So you should ask your tax advisor if you got a step up in basis. If so, your gain is probably minimal to zero after selling expenses, so you won’t have any gain that you need to shelter via an exchange.
Remember, I’m not a tax advisor, so please verify everything above with your favorite tax professional.
