Maclennan Investment Group, Inc.

925.385.8798

  • Home
  • Services
    • Commercial Property Management
    • Commercial and Industrial Leasing and Sales
    • Individual Investors
    • Note Purchases
  • About
    • Peter Maclennan
    • Book Peter
  • Blog
  • Investments
    • Contra Costa County Duplex, Triplex, and Fourplex
    • Commercial & Industrial Properties for Sale
    • Office, Retail, & Industrial Properties for Lease
    • Alameda County Duplex, Triplex, and Fourplex Invesment Properties
  • Articles
    • Interest Rates and Investment Property Values
    • 5 Mistakes Instant Millionaires Make
  • Contact
    • eNewsletter
  • Note Purchases
  • Commercial Loans
You are here: Home / Benefits of Real Estate Investing / Selling Tax Deferred Properties at a Loss Still Can Trigger a Taxable Gain

December 8, 2009 by Peter Maclennan Leave a Comment

Selling Tax Deferred Properties at a Loss Still Can Trigger a Taxable Gain

One of the benefits of holding real estate for investment is the ability to defer taxes on capital gains through what is known as a 1031 exchange. Section 1031 of the Internal Revenue Code provides for investors to delay capital gains on the sale of property as long as they invest the proceeds in a “like-kind” (same type) investment within 180 days.

Real estate investors have been using 1031 exchanges for decades to defer gains in properties and use the proceeds to invest in larger properties. With the recent decline in real estate values and the loss of some properties through foreclosure, 1031 exchanges may actually trigger capital gains tax for real estate investors.

The California Real Estate Journal detailed this dilemma in an article on September 14, 2009.

For the thousands of people who have invested in 1031 tax-deferred exchanges, the real estate downturn may be coming home to roost.

Section 1031 exchanges allow real estate investors to defer their capital gains taxes as long as they roll the gain from the sale of one property into the purchase of a like-kind replacement property. With today’s sharp decline in commercial real estate values, their current property likely is worth less than what they paid for it.

If they sell their property, even if they don’t make money on the sale, they are going to trigger the capital gains taxes that were due from their previous sales. Selling at a loss does not eliminate those deferred taxes, according to Daniel Oschin, managing director of BGK-Integrated Group and president of BGK-Integrated Investment Services.

“Your taxes are never wiped out,” Oschin said.

It’s a situation that is likely to hit home with people who have traded properties over three, four or even five different legs of a 1031 exchange, re-leveraging them over the years and rolling significant gains into the property they’re currently holding.

What appears to be a loss, may in fact trigger taxable income, because of a low tax basis. This unfortunate situation can leave a real estate investor caught trying to find cash to pay Uncle Sam. (Jeff Brown details how this catastrophe was avoided here.)

Competent tax professionals are necessary for every real estate investor. A CPA or tax attorney should be contacted when considering a real estate investment decision.

Share the love:

  • Click to share on Facebook (Opens in new window) Facebook
  • Click to share on X (Opens in new window) X
  • Click to share on LinkedIn (Opens in new window) LinkedIn
  • Click to email a link to a friend (Opens in new window) Email
  • More
  • Click to share on Pinterest (Opens in new window) Pinterest
  • Click to print (Opens in new window) Print

Related

Filed Under: Benefits of Real Estate Investing, CA Real Estate, Real Estate Investing Tagged With: Real Estate Investor, Real Estate Investors, Section 1031 Exchanges

About Peter Maclennan

Peter Maclennan is a Real Estate Broker at Maclennan Investment Group, Inc. a real estate brokerage and advisory firm. From novice investors to institutional property owners Peter provides tailored service to his client's needs. Call him today to discuss your real estate need at (925) 385-8798 or visit him on the web at https://www.maclennaninvestments.com. CA DRE License#01801793

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Commercial Real Estate Search

Commercial Real Estate

Top Posts & Pages

  • Interest Rates and Investment Property Values
  • Calculating Net Operating Income or NOI
  • Alameda County Duplex, Triplex, and Fourplex Invesment Properties

Listings

exterior photo of 511 Wilbur Ave Suite B4 Antioch CA a metal warehouse building$9,200/mo8,000 sf Warehouse in Antioch511 WilburAveAntioch, CA 94509View Listing
Front view of warehouse/flex space with a high dock door.FOR LEASE: Light Industrial Warehouse/Flex Space with office -- 3380 Vincent Rd Pleasant Hill, CA 94553View Listing

Commercial Real Estate Financing

Commercial Real Estate Financing

Peter Maclennan

Real Estate Broker
CA DRE #01801793
Twitter: @MaclennanInvest
Facebook: Maclennan Investment Group
[More …]

Topics

  • Bay Area Real Estate News
  • Benefits of Real Estate Investing
  • CA Real Estate
  • Commercial Leasing
  • Concord Real Estate
  • Contra Costa Real Estate
  • Industrial Real Estate
  • Investment Property
  • Listing
  • Martinez Real Estate
  • Mrs.' Questions
  • Real Estate Investing
  • Retirement Freedom
  • Seasons Greetings
  • Tenant Representation
  • Walnut Creek

Recent Posts

  • Recent Real Estate Transactions Overview
  • LEASED: Light Industrial in Bay Point, CA
  • Happy Independence Day!
  • Wishing You a Blessed Christmas & 2023!
  • For Lease! Antioch Industrial Building

Company Profile

Welcome to Maclennan Investment Group, Inc., your East Bay Area real estate investment advisors. Maclennan Investment Group assists buyers and sellers of real estate maximize the investment potential of their real estate assets.

Learn More about us.
Offering real estate services in the communities of: Walnut Creek, Concord, Pleasant Hill, Martinez, Alamo, Lafayette, and surrounding cities.

Commercial Financing

Commercial Financing
Disclaimer: Information deemed reliable but not guaranteed. This site is not meant to offer legal or tax advice.

Equal Housing Opportunity

Contact Us:

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

925.385.8798

Maclennan Investment Group, Inc.
3380 Vincent Rd, Ste HUB
Pleasant Hill, CA 94523
p. (925) 385-8798
Licensed Broker in the State of California, DRE#01871809
Equal Housing Opportunity
Find us on Yelp!
Check out Maclennan Investment Group, Inc. on Yelp

Copyright © 2025 · Maclennan Investment Group, Inc.