How To Close Real Estate Expenses With A 1031 Tax Exchange
There are many expenses involved in the closing of a sale on real estate. There are the standard operating expenses, such as your agent's commission and the recording of the deed, which siphon money out of your proceeds and appear on the closing statement, but there are also the various oddball expenses that arise during the proceedings, some common examples of which are rent proration and security deposits.
These types of expenses do not form part of the closing statement. Transactions on 1031 exchange allow some expenses to be debited on your closing statement. However, some costs are inappropriate to be included so.
The correct way to go about transferring future rent and security deposits to the new owner of the property is to cut a check from your own expense account. If you debit these kinds of expenses to your closings statement, you are effectively freeing money in your account for your own use and taking what is known as boot from the proceeds of the transaction.
Taking away boot or sale proceeds has caused many investors to be pursued by the IRS for judicial proceeding. Cash benefits or boot from the sale of a property is not part of a like-kind exchange.
In the process of a 1031 exchange, you will also face expenses related to the acquisition of new debt on your replacement property. Loan origination fees, underwriting fees, and processing fees are not part of a like-kind exchange and the money must come out of your own property.
What this article would like to leave you is that as an investor, you need to be very careful in your closing transactions. The IRS looks closely into these kinds of transactions and your receipt of cash benefits from 1031 exchanges can have its drawbacks. - 23199
These types of expenses do not form part of the closing statement. Transactions on 1031 exchange allow some expenses to be debited on your closing statement. However, some costs are inappropriate to be included so.
The correct way to go about transferring future rent and security deposits to the new owner of the property is to cut a check from your own expense account. If you debit these kinds of expenses to your closings statement, you are effectively freeing money in your account for your own use and taking what is known as boot from the proceeds of the transaction.
Taking away boot or sale proceeds has caused many investors to be pursued by the IRS for judicial proceeding. Cash benefits or boot from the sale of a property is not part of a like-kind exchange.
In the process of a 1031 exchange, you will also face expenses related to the acquisition of new debt on your replacement property. Loan origination fees, underwriting fees, and processing fees are not part of a like-kind exchange and the money must come out of your own property.
What this article would like to leave you is that as an investor, you need to be very careful in your closing transactions. The IRS looks closely into these kinds of transactions and your receipt of cash benefits from 1031 exchanges can have its drawbacks. - 23199
About the Author:
Investors in the U.S. can save a lot of money by using 1031 exchanges to defer all of their capital gains tax on the sale of investment property. A 1031 tax exchange is similar to an interest free loan from Uncle Sam.
posted by X - Men @ 12:10 AM
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