@j g wrote:
When you say "tax basis," do you mean the assessed value of the sold property at time of sale?
Assessed value generally refers to the value assigned by the local (typically county) real estate tax assessor/appraiser for the purposes of real estate (ad valorem) taxes.
Your tax basis would normally be your cost plus the cost of any improvements made, less accumulated depreciation (total depreciation deductions taken or could have been taken).
In short, with a 1031 exchange, if the FMV of the replacement property is less than the FMV of the relinquished property, you usually have boot, which is taxable. For example, if the FMV of the property you are exchanging is $15,000,000 and the FMV of the property you are receiving is $14,000,000, you have "boot" which is subject to tax).
Since, as @Mike9241 indicated, the FMV of the replacement property in your proposed scenario is actually less than your basis in the relinquished property, there would be no deferral.
Further, as @AmyC indicated, you cannot set up a 1031 exchange after the fact. If you received the proceeds from the sale of your property (actually or constructively), then it is too late for a 1031 exchange.
