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

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 – Debt Offset When 1031 Exchanging into a DST

Do you have to worry about debt relief when you’re buying into a DST? Let’s say you paid off a mortgage on the sale of your traditional physical real estate – how do you factor in that ascension in wealth that you just enjoyed on the sale?

When you’re buying a DST (Delaware Statutory Trust), if that investment has debt already in the underlying assets that are inside of the DST, you as a purchaser of the beneficial interest in that DST are not only deemed to own the underlying real estate – you’re also allocated whatever apportionment of debt is fractioned off for your portion of the purchase.

So you can offset your debt relief from the sale of your relinquished property if you buy into a leveraged DST and you can be allotted enough debt as a part of that purchase. The problem is, with higher interest rates, more and more DST sponsors are doing low or no leverage, all-cash DSTs, which do not lend themselves well to taxpayers who are selling higher leveraged physical real estate. So there can be a mismatch in the ratio of debt that you may or may not be accorded as part of your purchase. This is where having a qualified intermediary, accountant, and financial planner comes into the equation.

Find a Qualified Intermediary Near You

Find a qualified intermediary near you who can help you navigate the 1031 exchange process efficiently and effectively. With over twenty years of experience, CPEC1031, LLC is your go-to resource for all things 1031 exchange. Contact us today to learn more about the process, our services, and the many benefits of the like-kind 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Building on Land Already Owned by the Taxpayer in a 1031 Exchange

In general, doing a build-to-suit construction exchange on land already owned by the taxpayer is considered swimming upstream and contrary to the general trend. An exchange of real estate owned by a taxpayer for improvements on land owned by the same taxpayer does not meet the requirements of section 1031. Moreover, Rev. Rul. 67-255, 1967-2 C.C. 270, holds that a building constructed on land owned by a taxpayer is not of a like kind to involuntarily converted land of the same taxpayer.

That being said, there is a private letter ruling (PLF-125107-13) that has been used to fashion a work-around to construct improvements on a new leasehold estate (on top of the fee title owned by the taxpayer). This is kind of like four dimensional chess. You’ve got the fee title and then another level called the leasehold estate, on which the constructed improvements will exist.

More Information on 1031 Exchanges

If you’re looking for more information on 1031 exchanges, you’ve come to the right place! At CPEC1031, LLC we have been providing qualified intermediary services to taxpayers for over twenty years. During our time in the industry, we have built up a solid track record of helping our clients achieve capital gains tax deferral under section 1031 of the Internal Revenue Code. If you own investment real property that’s help for investment or business use, you could benefit from section 1031 too. Reach out to our professionals today to learn more about the 1031 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.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Can I do a Partial 1031 Exchange?

Some people don't want to reinvest all of their money into a replacement property because they don't want to be that heavy in real estate or their financial advisor says it's not a good idea to be too concentrated in any one particular type of investment.

Doing a Partial 1031 Exchange

So taxpayers that have very low basis and high gains may entertain the idea of a partial victory or a partial 1031 exchange, knowing upfront that we're not going to defer every penny of tax and they're going to take some of that cash off the table and reinvest it into other non like-kind property to have a greater amount of diversity. In this scenario you can still defer a great amount of gains by acquiring enough of the like kind properties to satisfy their strategic desire to do a partial 1031 exchange.

Delaware Statutory Trust Alternative

Another way to get a lot of diversity in your 1031 exchange is to purchase an interest in Delaware Statutory Trust. DSTs are like a little mini portfolios in which there might be five or six different properties and those properties may be located in different business segments or different geographic segments of the country. So you could get both business and geographic diversity in your replacement property acquisitions by going into a DST. That's another way to break the money up and get a greater amount of diversity so that you don't have all of your eggs in one basket.

• Start Your Exchange: If you have questions about partial 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