Investor's Loan Guide by Graham W. Parham

Mortgage Boot
The second fundamental rule is that the 1031 exchange requires that the
replacement property must be subject to an equal or greater level of debt
than the property sold or as a result the buyer will be forced to pay the tax on
the amount of the decrease. If not they will have to put in additional cash to
offset the low debt amount on the newly acquired property.
1. Example: Sold one property for $200,000 with a remaining loan
balance of $100,000 on the loan. Purchased three properties at $75,000 a
piece and putting three loans on each for $60,000 which equals to a total loan
amount of $180,000. Because the combined loan amounts for all three
properties were above what the sell property loan balance there is no capital
gains tax.
2. Example: Sold one property for $200,000 and purchase with a
remaining loan balance of $100,000. Purchasing three properties at $75,000 a
piece and putting three loans on each of $30,000 which equals to a total loan
amount of $90,000. Because the combined loan amounts for all three
properties were lower than the sell property loan balance there would capital
gains tax on $10,000.
1031 Exchange Rules and Timelines
There are two timelines that anyone going for a 1031 property exchange
should abide by and know.
The Identification Period
This is the crucial period during which the party selling a property must identify
other replacement properties that they propose to or wish to buy. It is not
uncommon to select more than one property. This period is scheduled exactly
45 days from the day of selling the relinquished property. This 45-day timeline
must be followed under any and all circumstances and is not extendable in
any way, even if the 45th day falls on a Saturday, Sunday or legal US holiday.
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