No, you do not have to spend all of your funds. However, any amount not spent will be considered cash boot and will be subject to capital gains taxes and any applicable recaptured depreciation. For example, the Relinquished (sold) property is sold for $500,000.00. The Acquired (bought) property is bought for $400,000.00. The $100,000.00 would be considered cash boot and would be taxable.
Do I have to spend everything in my 1031 account?
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A 1031 exchange is an IRS process that allows you to save 30- 40% in taxes on the profits from the sale of your property. You must hire a qualified intermediary, 1031 Accommodator (that’s what we are) to make sure you are following the protocols correctly.