There are a number of fees you will need to pay in a 1031 exchange transaction – fees to your intermediary, fees to your CPA, and fees to your attorney, to name a few. It’s important to understand how to pay these fees without disrupting your exchange. This article is all about legal fees in a 1031 exchange – what to expect and how to pay them.
Customary Expenses
Most taxpayers conducting a 1031 exchange want to know if they can pay their legal fees using the sales proceeds from the exchange. This can get a little dicey. You are allowed to pay customary transactional expenses using the sales proceeds. This would include any legal fees that are directly associated with your 1031 exchange. But any indirectly related legal fees should be kept off of the closing statement. For example, if you had an attorney do some estate planning work done in relation to your exchange, this should not be paid with the sales proceeds.
When in Doubt, Pay Cash
If you are at all nervous about how to handle your legal fees in a 1031 exchange, it’s always a good idea to simply pay them in cash at the closing table. This completely avoids any potential issues. Your qualified intermediary will be able to guide you in the right direction with these issues.
CPEC1031
At CPEC1031, our team has been facilitating 1031 exchanges of real estate for more than twenty years. We bring those years of experience to the table for every single exchange. Using our expertise, we can help you identify appropriate replacement property, prepare your 1031 documents, and meet all the requirements of a successful 1031 exchange. Contact us today at our downtown Minneapolis office to learn more about the 1031 process, our services, and to see if you are a good candidate for an exchange.
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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