The selling price of the relinquished property is the starting for a 1031 computation. However, the property must be a business property, so it does not apply to your home, for example. If the relinquished property is not already a business property, you might consider converting it before the sale.

If the replacement property costs more the that selling price, the exchange is totally tax free and the basis of the replacement property is adjusted down for the "profit" deferred on that original sale.

If the replacement property costs less than that selling price, you have "boot." Your boot is taxable to the extent of gain deferred from the sales transaction.

The exchange process can be a forward or a reverse exchange and strict timelines must be observed.

If the property is in the OPPORTUNITY ZONE only the gains need to be reinvested to defer taxation.

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