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Posted on 8/2/22 at 2:14 pm to trident
When you sell the property all of the depreciation you took in previous years becomes ordinary income.
Say you have a $200k property and you rent it out for 20 years. You use that property as leverage and take out loans that total $150k. Then you sell it and you owe taxes on nearly $200k and still owe on the loan, so you can end up in the hole. It's called the 1031 trap.
Say you have a $200k property and you rent it out for 20 years. You use that property as leverage and take out loans that total $150k. Then you sell it and you owe taxes on nearly $200k and still owe on the loan, so you can end up in the hole. It's called the 1031 trap.
This post was edited on 8/2/22 at 2:19 pm
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