Closing Of A Sale On Real Estate And 1031 Exchange Transactions
In closing a sale on real estate, a number of expenses have to be considered such as the standard operating expenses pertaining to the money used as your agent's commission and for the recording of the deed. All these are taken from the proceeds and are reflected on the closing statement. Yet there are also other costs like rent proration and security deposits that crop up during the transaction.
A typical closing statement does not necessarily cover said expenses. Although in 1031 exchange transaction, some costs can be entered as debit - there are some that cannot be fashioned in the same way.
The property's new owner can have future rent and security deposits via a check taken from your personal account. It may pose some danger to debit these kinds of expenses to the closing statement primarily because in the process, you are taking 'boot' from the transaction's proceeds. In addition, you are freeing an amount from your account that is supposed to be for your own use.
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.
You are responsible for all the expenses related to your replacement property particularly those that are not under like-kind exchange. In the course of a 1031 exchange - you also have to take into account fees for loan origination, underwriting, and processing. Payment of these fees has to come from your own property.
The fact of the matter is that the IRS examines these sorts of transactions, and will not look kindly on your receiving non-like-kind proceeds or cash benefits from 1031 transactions. With this in mind, you should be wary and take care regarding what expenses end up on your closing statement. - 23159
A typical closing statement does not necessarily cover said expenses. Although in 1031 exchange transaction, some costs can be entered as debit - there are some that cannot be fashioned in the same way.
The property's new owner can have future rent and security deposits via a check taken from your personal account. It may pose some danger to debit these kinds of expenses to the closing statement primarily because in the process, you are taking 'boot' from the transaction's proceeds. In addition, you are freeing an amount from your account that is supposed to be for your own use.
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.
You are responsible for all the expenses related to your replacement property particularly those that are not under like-kind exchange. In the course of a 1031 exchange - you also have to take into account fees for loan origination, underwriting, and processing. Payment of these fees has to come from your own property.
The fact of the matter is that the IRS examines these sorts of transactions, and will not look kindly on your receiving non-like-kind proceeds or cash benefits from 1031 transactions. With this in mind, you should be wary and take care regarding what expenses end up on your closing statement. - 23159
About the Author:
U.S. investors can save big money by using a 1031 exchange to defer all of their capital gains tax on the sale of investment property. A 1031 tax exchange is like an interest free loan from the IRS.
posted by X - Men @ 7:06 AM
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