legal fees

Legal Fees to be Aware of in a 1031 Exchange

Legal Fees

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.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

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 CPEC1031. 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.

 

© 2018 Copyright Jeffrey R. Peterson All Rights Reserved