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.
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.
In changing ownership, you also transfer future rent and security deposits to the property's new owner. Getting the amount from your own account to cover said expenses can be the most suitable way to deal with this. You can not debit said expenses from your closing statement because in the process, you are freeing money from your account and using 'boot' from the transaction's proceeds.
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. - 23204
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.
In changing ownership, you also transfer future rent and security deposits to the property's new owner. Getting the amount from your own account to cover said expenses can be the most suitable way to deal with this. You can not debit said expenses from your closing statement because in the process, you are freeing money from your account and using 'boot' from the transaction's proceeds.
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. - 23204
About the Author:
U.S. investors can save a lot of money by utilizing 1031 tax exchanges to defer all of their capital gains tax on the sale of investment property. 1031 exchanges are like an interest free loan from the IRS.
posted by X - Men @ 4:15 AM
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