The answer is yes, you can use a 1031 exchange for a property that you have inherited. In fact, using a 1031 exchange can be an excellent way to defer paying taxes on the sale of an inherited property.
When you inherit a property, the property’s tax basis is typically “stepped up” to its fair market value at the time of the previous owner’s death. This means that if you sell the property for its current fair market value, you may not owe any capital gains taxes.
However, if you sell the property for more than its stepped-up basis, you will owe capital gains taxes on the difference. This is where a 1031 exchange can be useful.
By using a 1031 exchange, you can defer paying taxes on the sale of the inherited property by reinvesting the proceeds into another investment property. As long as you follow the IRS rules for 1031 exchanges, you can continue to defer taxes on the gains from the sale of the inherited property.
At 1031 Exchange Place, we specialize in helping investors navigate the complexities of 1031 exchanges. If you have any questions or would like to learn more about how a 1031 exchange could benefit you, please don’t hesitate to contact us.