Closing Of A Sale On Real Estate And 1031 Exchange Transactions
There are many expenses involved in the closing of a sale on real estate. There are the standard operating expenses, such as your agent's commission and the recording of the deed, which siphon money out of your proceeds and appear on the closing statement, but there are also the various oddball expenses that arise during the proceedings, some common examples of which are rent proration and security deposits.
A typical closing statement does not necessarily cover said expenses. Although in 1031 exchange transaction, some costs can be entered as debit - there are some that cannot be fashioned in the same way.
The correct way to go about transferring future rent and security deposits to the new owner of the property is to cut a check from your own expense account. If you debit these kinds of expenses to your closings statement, you are effectively freeing money in your account for your own use and taking what is known as boot from the proceeds of the transaction.
Like-kind exchange does not consider all cash benefits or boot received from the sale of a property. In fact, the IRS has pursued all property investors who tried to use this kind of tactic.
Fees on loan origination, underwriting, and processing all must be dealt with as part of your acquiring possession on new debt on your replacement property. Since they do not form part of a like-kind exchange, the most sensible thing to do is to be the one responsible on these expenses.
The fact of the matter is that the IRS examines these sorts of transactions, and will not look kindly on your receiving non-like-kind proceeds or cash benefits from 1031 transactions. With this in mind, you should be wary and take care regarding what expenses end up on your closing statement. - 23212
A typical closing statement does not necessarily cover said expenses. Although in 1031 exchange transaction, some costs can be entered as debit - there are some that cannot be fashioned in the same way.
The correct way to go about transferring future rent and security deposits to the new owner of the property is to cut a check from your own expense account. If you debit these kinds of expenses to your closings statement, you are effectively freeing money in your account for your own use and taking what is known as boot from the proceeds of the transaction.
Like-kind exchange does not consider all cash benefits or boot received from the sale of a property. In fact, the IRS has pursued all property investors who tried to use this kind of tactic.
Fees on loan origination, underwriting, and processing all must be dealt with as part of your acquiring possession on new debt on your replacement property. Since they do not form part of a like-kind exchange, the most sensible thing to do is to be the one responsible on these expenses.
The fact of the matter is that the IRS examines these sorts of transactions, and will not look kindly on your receiving non-like-kind proceeds or cash benefits from 1031 transactions. With this in mind, you should be wary and take care regarding what expenses end up on your closing statement. - 23212
About the Author:
U.S. investors can save a lot of money by using 1031 tax exchanges to defer all of their capital gains tax on the sale of investment property. A 1031 exchange is like an interest free loan from the IRS.
posted by X - Men @ 4:13 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home