Pre-closing repair costs are not generally considered allowable transactional expenses unless they are contractual confessions made in the purchase agreement for the buyer.
You could take some taxable boot at the closing to reimburse yourself for these pre-closing repair costs…your CPA or accountant may be okay with a partially tax deferred exchange as the pre-closing repair costs are probably all tax deductible in the year of expenditure, so it’s potentially kind of a wash.
Or, you could do a 100% tax deferred exchange, and later refinance the Replacement Property in a separate later loan transaction to pull out equity later to pay yourself back.
In general, the expenses listed below can be paid at the 1031 exchange closing:
Broker’s commissions
Exchange fees
Title insurance fees for the owner’s policy of title insurance
Escrow fees / Closing Fees
Appraisal fees required by the purchase contract
Transfer taxes
Recording fees
Professional service fees such as CPA/accounting fees, attorney’s fees and financial planner charges incurred in connection with the sale or purchase of the relinquished property or replacement property
Contact a 1031 Intermediary
Are you interested in learning more about the tax-saving benefits of section 1031 of the Internal Revenue Code? Contact a qualified intermediary at CPEC1031, LLC today to get all of your questions answered. Our team of like-kind exchange intermediaries can help you through all the stages of your next 1031 exchange – ensuring you have all the information you need to make your exchange a success. We have more than twenty years of experience in the 1031 exchange industry and have helped countless taxpayers defer capital gains taxes under section 1031.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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