There are some items that you generally do not want to pay using your 1031 exchange proceeds. These items will likely trigger some taxable gain. They may also have some offsetting deductions that will mitigate that taxable gain. Nevertheless, it’s important to keep these in mind when conducting your 1031 exchange:
Prorated Rents
Security Deposits
Utility Payments
Real Property Taxes
Insurance
HOA, Condo/Townhome/Coop Associations Dues
Repair or Maintenance Expenses
Loan Acquisition Fees
Repair & Maintenance Expenses
Let’s say that you own a duplex that’s in rough shape and you need to do some repairs on the property to prepare it for sale. Generally speaking, repair expenses are an operational expense, not a marketing expense. You may not be able to recoup on the settlement statement your outlays made to maintain the property. This gets even more tricky when you consider the difference between repair or maintenance expenses and capital improvement expenses (such as replacing an HVAC unit or adding a new roof). These are treated differently and it’s essential to talk about these items with your 1031 exchange team before you get to the closing table so you can avoid any potential issues.
CPEC1031, LLC – Here to Help You Through Your 1031 Exchange
The qualified intermediaries at CPEC1031, LLC are here to help you through all the nitty gritty details of your 1031 exchange. Our skilled professionals have over two decades worth of experience facilitating exchanges of like-kind real estate. Let us put our vast array of knowledge to work for you as you defer capital gains taxes on the sale of your qualifying real estate. Contact us today to set up a time to chat about your exchange at our downtown Minneapolis office.
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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