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Partial 1031 Exchanges: It's Not All or Nothing
Partial 1031 Exchanges: It's Not All or Nothing
Partial 1031 Exchanges: It's Not All or Nothing
A 1031 exchange doesn't have to be all or nothing. Learn how partial exchanges work, when taxable gain arises, and how different reinvestment strategies affect tax deferral.
A 1031 exchange doesn't have to be all or nothing. Learn how partial exchanges work, when taxable gain arises, and how different reinvestment strategies affect tax deferral.
A 1031 exchange doesn't have to be all or nothing. Investors can choose to reinvest only a portion of their sale proceeds and still defer taxes on part of their gain.
This is known as a partial 1031 exchange.
A partial exchange can be intentional, such as when an investor wants to retain some cash from a property sale, or it can result from purchasing a replacement property worth less than the property sold.
While partial exchanges can offer valuable flexibility, the tax consequences aren't always straightforward. Depending on how the transaction is structured, an investor may recognize some of the gain or potentially all of it.
Understanding the difference is essential to making an informed decision.
Understanding the Numbers: An Example
Let's look at a hypothetical investor named Tina.
Tina purchased a rental property ten years ago for $300,000. She is now selling it for $640,000.
Over the years, she has claimed $100,000 in depreciation, and she still has a $200,000 mortgage balance on the property.
Here is how the numbers break down:
Transaction Details | Amount |
|---|---|
Original purchase price | $300,000 |
Sale price | $640,000 |
Selling expenses | ($40,000) |
Net sales price | $600,000 |
Remaining mortgage | ($200,000) |
Net cash proceeds | $400,000 |
Accumulated depreciation | $100,000 |
Adjusted tax basis | $200,000 |
Total realized gain | $400,000 |
Tina's total gain consists of $300,000 in appreciation after selling expenses, plus $100,000 attributable to depreciation deductions.
Her adjusted tax basis is $200,000, calculated by subtracting the $100,000 of depreciation from her original $300,000 purchase price.
Subtracting that adjusted basis from the $600,000 net sales price gives Tina a total realized gain of $400,000.
Without a 1031 exchange, she would generally recognize the full $400,000 gain, subject to the applicable tax treatment of its components.
Three Important Numbers
For purposes of understanding Tina's exchange, we'll focus on three figures:
$600,000 — Net Sales Price: The amount Tina would generally need to match or exceed in replacement property value to defer her entire gain.
$400,000 — Net Cash Proceeds: The cash available after selling expenses and mortgage payoff.
$200,000 — Adjusted Tax Basis: Her original cost, reduced by depreciation, assuming no other basis adjustments.
Together, these numbers help illustrate how different replacement property purchases can affect her tax deferral.
What Does Tina Need to Do to Defer All Her Gain?
To fully defer her $400,000 gain through a standard 1031 exchange, Tina would generally need to:
Purchase qualifying replacement property worth at least $600,000.
Reinvest all $400,000 of her net exchange proceeds.
Replace the $200,000 of debt paid off at the relinquished property closing, either through new financing or additional cash.
She must also satisfy the other applicable 1031 exchange requirements.
If Tina buys a less expensive property or keeps some of the sale proceeds, she may recognize taxable gain. This is commonly referred to as receiving boot.
Let's explore how different decisions affect her exchange.
Scenario 1: Purchasing a Less Expensive Property
Tina decides to purchase replacement property for $500,000.
She uses all $400,000 of her exchange proceeds and obtains a new $100,000 mortgage.
Although Tina has reinvested all her cash, the replacement property costs $100,000 less than her $600,000 net sales price.
Additionally, she has replaced only $100,000 of the $200,000 debt that was paid off when she sold her original property.
In this simplified example, the $100,000 reduction in debt creates taxable mortgage boot.
The result:
Replacement property: $500,000
Cash reinvested: $400,000
New mortgage: $100,000
Taxable gain: $100,000
Deferred gain: $300,000
Tina successfully defers taxes on $300,000 of her gain, but recognizes the remaining $100,000.
Scenario 2: Purchasing a More Expensive Property but Keeping Cash
Now suppose Tina purchases a replacement property for $800,000.
She uses $200,000 of her exchange proceeds toward the purchase and obtains a $600,000 mortgage.
Although the replacement property is worth more than the property she sold, Tina has used only half of her available exchange proceeds.
The remaining $200,000 is cash boot and is generally taxable when received.
The result:
Replacement property: $800,000
Cash reinvested: $200,000
New mortgage: $600,000
Cash retained: $200,000
Taxable gain: $200,000
Deferred gain: $200,000
This illustrates an important distinction: buying a more expensive property does not automatically eliminate taxable gain if the investor retains some of the exchange proceeds.
Scenario 3: Purchasing Property Equal to the Adjusted Basis
What if Tina purchases replacement property for only $200,000?
This is $400,000 below her original $600,000 net sales price and equals her adjusted tax basis.
Assuming she uses $200,000 of her exchange proceeds to buy the replacement property, retains the other $200,000, and takes on no new debt, she has both cash boot and unreplaced debt.
The result:
Replacement property: $200,000
Cash reinvested: $200,000
Cash retained: $200,000
New mortgage: $0
Taxable gain: $400,000
Deferred gain: $0
Although Tina acquired replacement property, she has not deferred any of her realized gain.
This demonstrates why completing a 1031 exchange does not necessarily mean achieving a tax benefit.
Scenario 4: Purchasing a More Expensive Property and Reinvesting Everything
Let's revisit the $800,000 replacement property from Scenario 2.
This time, Tina uses all $400,000 of her exchange proceeds and finances the remaining $400,000.
Because she has acquired a property worth more than her net sales price, reinvested all her proceeds, and replaced her original debt, she can fully defer her gain, assuming all other exchange requirements are met.
The result:
Replacement property: $800,000
Cash reinvested: $400,000
New mortgage: $400,000
Taxable gain: $0
Deferred gain: $400,000
Tina has achieved full tax deferral.
Scenario 5: Intentionally Completing a Partial Exchange
After reviewing her options, Tina decides she wants to keep $100,000 from the sale rather than reinvest all her proceeds.
She understands that this will generally trigger recognition of $100,000 in taxable gain, but she still wants to defer taxes on the remaining $300,000.
Under the simplified assumptions in this example, Tina can accomplish this by purchasing replacement property worth at least $500,000 and reinvesting $300,000 of her exchange proceeds, with sufficient financing or additional funds to complete the purchase.
But why $500,000 when her original net sales price was $600,000?
Because Tina has chosen to recognize $100,000 of her gain, she can reduce the amount of replacement property needed for her intended partial deferral by that amount, provided the rest of the transaction is structured appropriately.
The result:
Replacement property: $500,000
Cash reinvested: $300,000
New mortgage: $200,000
Cash retained: $100,000
Taxable gain: $100,000
Deferred gain: $300,000
Tina has kept $100,000 for immediate use while still deferring taxes on $300,000 of her gain.
This is one of the principal benefits of a planned partial 1031 exchange.
Comparing Tina's Options
Scenario | Replacement Value | Taxable Gain | Deferred Gain |
|---|---|---|---|
1. Lower-value property | $500,000 | $100,000 | $300,000 |
2. Higher-value property, cash retained | $800,000 | $200,000 | $200,000 |
3. Property equal to adjusted basis | $200,000 | $400,000 | $0 |
4. Higher-value property, full reinvestment | $800,000 | $0 | $400,000 |
5. Planned partial exchange | $500,000 | $100,000 | $300,000 |
As these examples illustrate, the value of the replacement property, the amount of cash reinvested, and the financing structure all affect the outcome.
A partial exchange can preserve a substantial portion of the tax-deferral benefit, even when the investor does not reinvest everything.
Planning a Partial 1031 Exchange
A partial exchange can be an effective strategy for investors who want to retain liquidity while deferring some of their taxable gain.
However, the tax consequences depend on more than simply how much cash is kept. Debt relief, replacement property value, adjusted basis, depreciation, and transaction expenses can all influence the result.
Importantly, taxable gain is not the same as the amount of tax owed. The actual tax liability will depend on the character of the gain and the investor's applicable federal and state tax treatment.
For investors who know they want to retain cash, planning before the relinquished property closes can also help ensure funds are distributed appropriately rather than unnecessarily restricted during the exchange period.
A 1031 exchange is not an all-or-nothing proposition. With the right planning, investors may be able to balance immediate cash needs with meaningful tax deferral.
If you're considering a partial 1031 exchange, ADE can help you understand the exchange process and coordinate with your tax advisor to structure the transaction appropriately.
These examples are simplified for illustrative purposes and assume no capital improvements, no prior 1031 exchange acquisition, no land value, and no other adjustments affecting the calculations. Actual transactions may involve additional tax considerations, and outcomes will vary based on the specific circumstances. Consult your tax advisor before making investment or tax-planning decisions.
A 1031 exchange doesn't have to be all or nothing. Investors can choose to reinvest only a portion of their sale proceeds and still defer taxes on part of their gain.
This is known as a partial 1031 exchange.
A partial exchange can be intentional, such as when an investor wants to retain some cash from a property sale, or it can result from purchasing a replacement property worth less than the property sold.
While partial exchanges can offer valuable flexibility, the tax consequences aren't always straightforward. Depending on how the transaction is structured, an investor may recognize some of the gain or potentially all of it.
Understanding the difference is essential to making an informed decision.
Understanding the Numbers: An Example
Let's look at a hypothetical investor named Tina.
Tina purchased a rental property ten years ago for $300,000. She is now selling it for $640,000.
Over the years, she has claimed $100,000 in depreciation, and she still has a $200,000 mortgage balance on the property.
Here is how the numbers break down:
Transaction Details | Amount |
|---|---|
Original purchase price | $300,000 |
Sale price | $640,000 |
Selling expenses | ($40,000) |
Net sales price | $600,000 |
Remaining mortgage | ($200,000) |
Net cash proceeds | $400,000 |
Accumulated depreciation | $100,000 |
Adjusted tax basis | $200,000 |
Total realized gain | $400,000 |
Tina's total gain consists of $300,000 in appreciation after selling expenses, plus $100,000 attributable to depreciation deductions.
Her adjusted tax basis is $200,000, calculated by subtracting the $100,000 of depreciation from her original $300,000 purchase price.
Subtracting that adjusted basis from the $600,000 net sales price gives Tina a total realized gain of $400,000.
Without a 1031 exchange, she would generally recognize the full $400,000 gain, subject to the applicable tax treatment of its components.
Three Important Numbers
For purposes of understanding Tina's exchange, we'll focus on three figures:
$600,000 — Net Sales Price: The amount Tina would generally need to match or exceed in replacement property value to defer her entire gain.
$400,000 — Net Cash Proceeds: The cash available after selling expenses and mortgage payoff.
$200,000 — Adjusted Tax Basis: Her original cost, reduced by depreciation, assuming no other basis adjustments.
Together, these numbers help illustrate how different replacement property purchases can affect her tax deferral.
What Does Tina Need to Do to Defer All Her Gain?
To fully defer her $400,000 gain through a standard 1031 exchange, Tina would generally need to:
Purchase qualifying replacement property worth at least $600,000.
Reinvest all $400,000 of her net exchange proceeds.
Replace the $200,000 of debt paid off at the relinquished property closing, either through new financing or additional cash.
She must also satisfy the other applicable 1031 exchange requirements.
If Tina buys a less expensive property or keeps some of the sale proceeds, she may recognize taxable gain. This is commonly referred to as receiving boot.
Let's explore how different decisions affect her exchange.
Scenario 1: Purchasing a Less Expensive Property
Tina decides to purchase replacement property for $500,000.
She uses all $400,000 of her exchange proceeds and obtains a new $100,000 mortgage.
Although Tina has reinvested all her cash, the replacement property costs $100,000 less than her $600,000 net sales price.
Additionally, she has replaced only $100,000 of the $200,000 debt that was paid off when she sold her original property.
In this simplified example, the $100,000 reduction in debt creates taxable mortgage boot.
The result:
Replacement property: $500,000
Cash reinvested: $400,000
New mortgage: $100,000
Taxable gain: $100,000
Deferred gain: $300,000
Tina successfully defers taxes on $300,000 of her gain, but recognizes the remaining $100,000.
Scenario 2: Purchasing a More Expensive Property but Keeping Cash
Now suppose Tina purchases a replacement property for $800,000.
She uses $200,000 of her exchange proceeds toward the purchase and obtains a $600,000 mortgage.
Although the replacement property is worth more than the property she sold, Tina has used only half of her available exchange proceeds.
The remaining $200,000 is cash boot and is generally taxable when received.
The result:
Replacement property: $800,000
Cash reinvested: $200,000
New mortgage: $600,000
Cash retained: $200,000
Taxable gain: $200,000
Deferred gain: $200,000
This illustrates an important distinction: buying a more expensive property does not automatically eliminate taxable gain if the investor retains some of the exchange proceeds.
Scenario 3: Purchasing Property Equal to the Adjusted Basis
What if Tina purchases replacement property for only $200,000?
This is $400,000 below her original $600,000 net sales price and equals her adjusted tax basis.
Assuming she uses $200,000 of her exchange proceeds to buy the replacement property, retains the other $200,000, and takes on no new debt, she has both cash boot and unreplaced debt.
The result:
Replacement property: $200,000
Cash reinvested: $200,000
Cash retained: $200,000
New mortgage: $0
Taxable gain: $400,000
Deferred gain: $0
Although Tina acquired replacement property, she has not deferred any of her realized gain.
This demonstrates why completing a 1031 exchange does not necessarily mean achieving a tax benefit.
Scenario 4: Purchasing a More Expensive Property and Reinvesting Everything
Let's revisit the $800,000 replacement property from Scenario 2.
This time, Tina uses all $400,000 of her exchange proceeds and finances the remaining $400,000.
Because she has acquired a property worth more than her net sales price, reinvested all her proceeds, and replaced her original debt, she can fully defer her gain, assuming all other exchange requirements are met.
The result:
Replacement property: $800,000
Cash reinvested: $400,000
New mortgage: $400,000
Taxable gain: $0
Deferred gain: $400,000
Tina has achieved full tax deferral.
Scenario 5: Intentionally Completing a Partial Exchange
After reviewing her options, Tina decides she wants to keep $100,000 from the sale rather than reinvest all her proceeds.
She understands that this will generally trigger recognition of $100,000 in taxable gain, but she still wants to defer taxes on the remaining $300,000.
Under the simplified assumptions in this example, Tina can accomplish this by purchasing replacement property worth at least $500,000 and reinvesting $300,000 of her exchange proceeds, with sufficient financing or additional funds to complete the purchase.
But why $500,000 when her original net sales price was $600,000?
Because Tina has chosen to recognize $100,000 of her gain, she can reduce the amount of replacement property needed for her intended partial deferral by that amount, provided the rest of the transaction is structured appropriately.
The result:
Replacement property: $500,000
Cash reinvested: $300,000
New mortgage: $200,000
Cash retained: $100,000
Taxable gain: $100,000
Deferred gain: $300,000
Tina has kept $100,000 for immediate use while still deferring taxes on $300,000 of her gain.
This is one of the principal benefits of a planned partial 1031 exchange.
Comparing Tina's Options
Scenario | Replacement Value | Taxable Gain | Deferred Gain |
|---|---|---|---|
1. Lower-value property | $500,000 | $100,000 | $300,000 |
2. Higher-value property, cash retained | $800,000 | $200,000 | $200,000 |
3. Property equal to adjusted basis | $200,000 | $400,000 | $0 |
4. Higher-value property, full reinvestment | $800,000 | $0 | $400,000 |
5. Planned partial exchange | $500,000 | $100,000 | $300,000 |
As these examples illustrate, the value of the replacement property, the amount of cash reinvested, and the financing structure all affect the outcome.
A partial exchange can preserve a substantial portion of the tax-deferral benefit, even when the investor does not reinvest everything.
Planning a Partial 1031 Exchange
A partial exchange can be an effective strategy for investors who want to retain liquidity while deferring some of their taxable gain.
However, the tax consequences depend on more than simply how much cash is kept. Debt relief, replacement property value, adjusted basis, depreciation, and transaction expenses can all influence the result.
Importantly, taxable gain is not the same as the amount of tax owed. The actual tax liability will depend on the character of the gain and the investor's applicable federal and state tax treatment.
For investors who know they want to retain cash, planning before the relinquished property closes can also help ensure funds are distributed appropriately rather than unnecessarily restricted during the exchange period.
A 1031 exchange is not an all-or-nothing proposition. With the right planning, investors may be able to balance immediate cash needs with meaningful tax deferral.
If you're considering a partial 1031 exchange, ADE can help you understand the exchange process and coordinate with your tax advisor to structure the transaction appropriately.
These examples are simplified for illustrative purposes and assume no capital improvements, no prior 1031 exchange acquisition, no land value, and no other adjustments affecting the calculations. Actual transactions may involve additional tax considerations, and outcomes will vary based on the specific circumstances. Consult your tax advisor before making investment or tax-planning decisions.
A 1031 exchange doesn't have to be all or nothing. Investors can choose to reinvest only a portion of their sale proceeds and still defer taxes on part of their gain.
This is known as a partial 1031 exchange.
A partial exchange can be intentional, such as when an investor wants to retain some cash from a property sale, or it can result from purchasing a replacement property worth less than the property sold.
While partial exchanges can offer valuable flexibility, the tax consequences aren't always straightforward. Depending on how the transaction is structured, an investor may recognize some of the gain or potentially all of it.
Understanding the difference is essential to making an informed decision.
Understanding the Numbers: An Example
Let's look at a hypothetical investor named Tina.
Tina purchased a rental property ten years ago for $300,000. She is now selling it for $640,000.
Over the years, she has claimed $100,000 in depreciation, and she still has a $200,000 mortgage balance on the property.
Here is how the numbers break down:
Transaction Details | Amount |
|---|---|
Original purchase price | $300,000 |
Sale price | $640,000 |
Selling expenses | ($40,000) |
Net sales price | $600,000 |
Remaining mortgage | ($200,000) |
Net cash proceeds | $400,000 |
Accumulated depreciation | $100,000 |
Adjusted tax basis | $200,000 |
Total realized gain | $400,000 |
Tina's total gain consists of $300,000 in appreciation after selling expenses, plus $100,000 attributable to depreciation deductions.
Her adjusted tax basis is $200,000, calculated by subtracting the $100,000 of depreciation from her original $300,000 purchase price.
Subtracting that adjusted basis from the $600,000 net sales price gives Tina a total realized gain of $400,000.
Without a 1031 exchange, she would generally recognize the full $400,000 gain, subject to the applicable tax treatment of its components.
Three Important Numbers
For purposes of understanding Tina's exchange, we'll focus on three figures:
$600,000 — Net Sales Price: The amount Tina would generally need to match or exceed in replacement property value to defer her entire gain.
$400,000 — Net Cash Proceeds: The cash available after selling expenses and mortgage payoff.
$200,000 — Adjusted Tax Basis: Her original cost, reduced by depreciation, assuming no other basis adjustments.
Together, these numbers help illustrate how different replacement property purchases can affect her tax deferral.
What Does Tina Need to Do to Defer All Her Gain?
To fully defer her $400,000 gain through a standard 1031 exchange, Tina would generally need to:
Purchase qualifying replacement property worth at least $600,000.
Reinvest all $400,000 of her net exchange proceeds.
Replace the $200,000 of debt paid off at the relinquished property closing, either through new financing or additional cash.
She must also satisfy the other applicable 1031 exchange requirements.
If Tina buys a less expensive property or keeps some of the sale proceeds, she may recognize taxable gain. This is commonly referred to as receiving boot.
Let's explore how different decisions affect her exchange.
Scenario 1: Purchasing a Less Expensive Property
Tina decides to purchase replacement property for $500,000.
She uses all $400,000 of her exchange proceeds and obtains a new $100,000 mortgage.
Although Tina has reinvested all her cash, the replacement property costs $100,000 less than her $600,000 net sales price.
Additionally, she has replaced only $100,000 of the $200,000 debt that was paid off when she sold her original property.
In this simplified example, the $100,000 reduction in debt creates taxable mortgage boot.
The result:
Replacement property: $500,000
Cash reinvested: $400,000
New mortgage: $100,000
Taxable gain: $100,000
Deferred gain: $300,000
Tina successfully defers taxes on $300,000 of her gain, but recognizes the remaining $100,000.
Scenario 2: Purchasing a More Expensive Property but Keeping Cash
Now suppose Tina purchases a replacement property for $800,000.
She uses $200,000 of her exchange proceeds toward the purchase and obtains a $600,000 mortgage.
Although the replacement property is worth more than the property she sold, Tina has used only half of her available exchange proceeds.
The remaining $200,000 is cash boot and is generally taxable when received.
The result:
Replacement property: $800,000
Cash reinvested: $200,000
New mortgage: $600,000
Cash retained: $200,000
Taxable gain: $200,000
Deferred gain: $200,000
This illustrates an important distinction: buying a more expensive property does not automatically eliminate taxable gain if the investor retains some of the exchange proceeds.
Scenario 3: Purchasing Property Equal to the Adjusted Basis
What if Tina purchases replacement property for only $200,000?
This is $400,000 below her original $600,000 net sales price and equals her adjusted tax basis.
Assuming she uses $200,000 of her exchange proceeds to buy the replacement property, retains the other $200,000, and takes on no new debt, she has both cash boot and unreplaced debt.
The result:
Replacement property: $200,000
Cash reinvested: $200,000
Cash retained: $200,000
New mortgage: $0
Taxable gain: $400,000
Deferred gain: $0
Although Tina acquired replacement property, she has not deferred any of her realized gain.
This demonstrates why completing a 1031 exchange does not necessarily mean achieving a tax benefit.
Scenario 4: Purchasing a More Expensive Property and Reinvesting Everything
Let's revisit the $800,000 replacement property from Scenario 2.
This time, Tina uses all $400,000 of her exchange proceeds and finances the remaining $400,000.
Because she has acquired a property worth more than her net sales price, reinvested all her proceeds, and replaced her original debt, she can fully defer her gain, assuming all other exchange requirements are met.
The result:
Replacement property: $800,000
Cash reinvested: $400,000
New mortgage: $400,000
Taxable gain: $0
Deferred gain: $400,000
Tina has achieved full tax deferral.
Scenario 5: Intentionally Completing a Partial Exchange
After reviewing her options, Tina decides she wants to keep $100,000 from the sale rather than reinvest all her proceeds.
She understands that this will generally trigger recognition of $100,000 in taxable gain, but she still wants to defer taxes on the remaining $300,000.
Under the simplified assumptions in this example, Tina can accomplish this by purchasing replacement property worth at least $500,000 and reinvesting $300,000 of her exchange proceeds, with sufficient financing or additional funds to complete the purchase.
But why $500,000 when her original net sales price was $600,000?
Because Tina has chosen to recognize $100,000 of her gain, she can reduce the amount of replacement property needed for her intended partial deferral by that amount, provided the rest of the transaction is structured appropriately.
The result:
Replacement property: $500,000
Cash reinvested: $300,000
New mortgage: $200,000
Cash retained: $100,000
Taxable gain: $100,000
Deferred gain: $300,000
Tina has kept $100,000 for immediate use while still deferring taxes on $300,000 of her gain.
This is one of the principal benefits of a planned partial 1031 exchange.
Comparing Tina's Options
Scenario | Replacement Value | Taxable Gain | Deferred Gain |
|---|---|---|---|
1. Lower-value property | $500,000 | $100,000 | $300,000 |
2. Higher-value property, cash retained | $800,000 | $200,000 | $200,000 |
3. Property equal to adjusted basis | $200,000 | $400,000 | $0 |
4. Higher-value property, full reinvestment | $800,000 | $0 | $400,000 |
5. Planned partial exchange | $500,000 | $100,000 | $300,000 |
As these examples illustrate, the value of the replacement property, the amount of cash reinvested, and the financing structure all affect the outcome.
A partial exchange can preserve a substantial portion of the tax-deferral benefit, even when the investor does not reinvest everything.
Planning a Partial 1031 Exchange
A partial exchange can be an effective strategy for investors who want to retain liquidity while deferring some of their taxable gain.
However, the tax consequences depend on more than simply how much cash is kept. Debt relief, replacement property value, adjusted basis, depreciation, and transaction expenses can all influence the result.
Importantly, taxable gain is not the same as the amount of tax owed. The actual tax liability will depend on the character of the gain and the investor's applicable federal and state tax treatment.
For investors who know they want to retain cash, planning before the relinquished property closes can also help ensure funds are distributed appropriately rather than unnecessarily restricted during the exchange period.
A 1031 exchange is not an all-or-nothing proposition. With the right planning, investors may be able to balance immediate cash needs with meaningful tax deferral.
If you're considering a partial 1031 exchange, ADE can help you understand the exchange process and coordinate with your tax advisor to structure the transaction appropriately.
These examples are simplified for illustrative purposes and assume no capital improvements, no prior 1031 exchange acquisition, no land value, and no other adjustments affecting the calculations. Actual transactions may involve additional tax considerations, and outcomes will vary based on the specific circumstances. Consult your tax advisor before making investment or tax-planning decisions.