Can You Take Money Out of a 1031 Exchange?

If you’re willing to incur some tax, you may purchase less than your net sale. And you may take cash out without jeopardizing the entirety of your 1031 exchange. But if you want to purchase less than what you sold or want to take some cash out, then the IRS will call that “booty” and tax it as profit. The IRS is willing to leave its tax in the game, but they are expecting you to leave your profit in the game as well. So, there’s no taking your “booty” and buying an island without paying at least some tax. And it is taxable because their interpretation is that the first dollar you take out is going to be a dollar of profit. 

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As a Qualified Intermediary facilitating thousands of 1031 exchanges over the past 20 years, I’ve learned a few things about smooth and successful closings.

I help Real Estate Professionals … Streamline closings, Maximize Real Estate Portfolio Growth and Minimize Taxes.

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