How to Pay Your Legal Fees in a 1031 Exchange

 Legal Fees in 1031 Exchanges

When engaging in a 1031 exchange, there are numerous fees you need to keep track of and rules that govern how you can pay these fees. Many taxpayers have questions about how to pay their legal fees in a 1031 exchange. That’s our topic for this article. We’ll discuss how to pay your legal fees and the various rules surrounding legal fees in a like-kind exchange.

Paying Fees with the 1031 Proceeds

Paying fees with the net proceeds from the sale of your relinquished property is a little tricky. You can only use these funds to pay for customary transactional expenses. Legal fees directly related to the exchange of your property would likely fall into this category. However, any unrelated legal fees should not be paid with these net proceeds. By way of an example, if you did some estate planning work in conjunction with your 1031 exchange, these fees would not count as related fees and should not be paid with the sales proceeds.

When in doubt, it’s always a good practice to simply pay associated fees with cash at closing. If you have any questions, a qualified intermediary can help you navigate the rules and regulations.

Questions About Your 1031 Exchange?

If you have questions about your 1031 exchange, don’t hesitate to reach out to us at Commercial Partners Exchange Company. Our qualified intermediaries have been helping clients with their exchanges of real property for the past two decades. We can get all of your documents prepared and guide you through every stage of the like-kind exchange process. Contact us today at our downtown Minneapolis office, or one of our other offices across the country. We are ready and able to help ensure your 1031 exchange is a success!

  •  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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