Tax Documents to Compile After Completing a 1031 Exchange

After completing your 1031 Exchange, what documents should you provide to your tax preparer to complete your tax return?

Your Certified Public Accountant (CPA) or tax accounting preparer will need specific information to verify and substantiate the details provided to the Internal Revenue Service (IRS) on IRS Form 8824.

Here’s a checklist of essential documents you can easily provide to expedite the completion of your tax return:

• Close-out letter from your qualified intermediary summarizing the 1031 exchange, detailing how your funds were utilized and the closing dates.

• PDF copy of the final signed Relinquished Property Closing Statement from the sale of your old investment or business real estate.

• PDF copy of the deed or other transfer document conveying ownership of the Relinquished Property to the purchaser.

• If you received a 1099-S from the closing agent, title closing, escrow officer, law firm, or individual responsible for the transaction, provide it to your CPA or tax accounting preparer. This document serves as proof of the gross proceeds from the sale or the cash you were entitled to receive as the transferor, potentially confirming the closing date.

• If you’re incurring unusual or non-standard transactional expenses or making financial concessions to the purchaser as per the terms of the sale contract (with any applicable amendments) with the buyer, you should also provide a PDF copy of the sale contract (purchase agreement). This document demonstrates your obligation to pay these transactional expenses or financial concessions, such as a repair allowance or partial rebate of the purchase price.

If you sent a 1031 replacement property identification form to your qualified intermediary or another party involved in the transaction during the 45-day identification period, you must provide a PDF copy of the final signed and sent document. This document should include information and confirmation that it was properly and timely sent. Additionally, it may be beneficial to include an acknowledgment of receipt.

The PDF copy should include the following:

• A PDF copy of the final signed replacement property closing statement from the sale of your old investment or business real estate.

• A PDF copy of the replacement property deed or other transfer document through which you received the ownership of the replacement property from the seller.

• Any corrected or changed documents that may have occurred after the closings, such as refunds for improperly calculated payoffs of real property taxes or mortgages, deeds of trust, or closing charges.

• A PDF copy of all of your fully signed 1031 documents, including your exchange agreement, assignment agreements, notices, and written verification of the use or return of unused 1031 exchange funds (if applicable).

Qualified Intermediaries Near You

Find a qualified intermediary near you to get your 1031 exchange questions answered. CPEC1031, LLC has been facilitating like-kind exchanges under section 1031 for more than two decades. Our skilled 1031 exchange professionals are here to guide you through the complex 1031 exchange process and make sure you have all your bases covered throughout the scope of your exchange. Contact us today at our downtown Minneapolis office to learn more about the services we offer and how we can help with your next 1031 exchange of investment real estate.

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Video – Transactional vs. Operational Expenses in a 1031 Exchange

In order to get your relinquished property sold, you had to spend some money to repair it and get it ready. Can you recoup those outlays that you made to fix up the property before its sale?

Generally, in a 1031 exchange you can only siphon off money to pay transactional expenses that are necessary like a real estate commission, state deed tax, recording fees, etc. Repair expenses are usually considered operational expenses. As a result, you probably don’t want to reach into the cookie jar for reimbursement of your operational expenses.

The only exception to that rule would be a situation in which the buyer extracts a concession from the seller in the purchase agreement that requires a certain repair as a material factor of the contract. In that case, the expense may be a transactional expense because it’s a requirement of the sale contract. This may also depend on how the concession is written in the contract so you need to surround yourself with a great team including your tax preparer, your real estate agent, and your qualified intermediary.

1031 Exchange Questions, Answered

Get all of your 1031 exchange questions answered by reaching out to a qualified intermediary at CPEC1031, LLC. We have more than twenty years of experience working on exchanges of real property under section 1031 of the Internal Revenue Code. We are here to help guide you through all the details of your next 1031 exchange and do everything possible to defer 100% of your capital gains tax burden.

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Can I Get Reimbursed for my Pre-Closing Repair Costs in a 1031 Exchange?

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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Video – Consolidating Multiple Relinquished Properties into a Bigger Replacement Property

Let’s talk about consolidation. If you’re selling multiple relinquished properties in a 1031 exchange, can you take the proceeds from numerous sales and combine them together to buy one bigger replacement property?

The answer is yes. However, this comes with two challenges.

1. The logistics of trying to herd all of your cats together for those multiple sales to occur, thus allowing you to assemble your capital for the big purchase.

2. Accounting issues. You need to make sure that the replacement property is valued large enough that it can accommodate the proceeds from multiple sales. Generally you want the replacement property to be at least equal if not greater in value than the amounts realized from the multiple relinquished properties. Those amounts realized are the gross sale prices minus the transactional expenses such as commissions, recording fees, and other things that reduce the profit on the sale.

Remember, you can do a 1031 exchange to acquire a bigger and better property but you have to work out the logistics and accounting.

CPEC1031, LLC – Start Your Like-Kind Exchange

Start your like-kind exchange with CPEC1031, LLC today. We have more than two decades of experience working with clients throughout the United States on their 1031 exchanges. We facilitate exchanges of all types – from duplexes, to retail spaces, to large office buildings. As long as you own property held primarily for investment or business purposes you can benefit from a 1031 exchange. Contact our office today to set up a time to chat about the many benefits of section 1031 and how you can begin the process.

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Video – Can You Buy 1031 Exchange Replacement Property in a New LLC?

If you sold your 1031 relinquished property in your own individual name, can you buy the replacement property through an LLC? Perhaps you want the LLC for liability, privacy, or maybe your lender is requiring it.

The answer is yes, you can buy in an LLC. However, that LLC cannot change the continuity of investment in that the same taxpayer that sold the relinquished property has to be the same taxpayer that acquires the replacement property. So if you own 100% of the LLC and the LLC is properly set up as a disregarded entity, it would be transparent for tax purposes. That’s a great way to acquire your replacement property in an LLC and not mess up your 1031 exchange.

Replacement property may be received by a taxpayer via a single member LLC that is disregarded as an entity separate from its owner (unless it elects to be taxed as an association). Reg Section 301.7701-2 and 3. The sole owner of an LLC which is disregarded for tax purposes is in the same position economically as if he/she had taken title in his/her own individual name. See Ltr. Ruls. 9751012 and 9807013. See also Schinner, "IRS Rulings Expand Opportunities for Using Single-Member LLCs in 1031 Exchanges," 88 JTAX 286 (May1998).

When an LLC is disregarded for tax purposes, the sole owner is in a similar economic position as if they had owned the property in their own individual name. This information is supported by Letter Ruling 9751012.

Defer Capital Gains Tax with a 1031 Exchange

Defer your capital gains taxes with a 1031 exchange and keep your money working for you in a continued investment! Like-kind exchanges are available for any US taxpayer to use. However, you need to be sure you’re meeting the 1031 exchange guidelines in order to defer your capital gains tax burden. The best way to do that is to work closely with a trusted qualified intermediary on your exchange. The intermediaries at CPEC1031, LLC have been facilitating exchanges for over twenty years. We can help you navigate the 1031 exchange process and defer your capital gains taxes.

• 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved