When you say proceeds need to be rolled over to avoid gain, is that all there is to it?

admin  /   January 25, 2019

No.  The essence of a trade is that one has not cashed out any part of the investment.  One must trade up or even on price.  And one must use all of the cash proceeds from the sale.  Taking this altogether, the transaction is taxable to the extent that the purchase price of the new property is less than the selling price of the old property.  And the transaction is taxable to the extent that there is cash left over with the qualified intermediary after the purchase of the new property (except that if the left-over cash is attributable to real estate tax prorations, security deposits or other prorations on the purchase of the new property; that money can often be taken off the table without creating tax).  If one trades up or even in price and uses up all the cash, then the debt (comparing the mortgage on the old property to the mortgage on the new property) should be roughly the same or greater.  If the debt goes down, there is potential tax unless more cash is put into the deal.  One cannot borrow more on the new property as a way of trading up and taking cash out of the deal.

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