{"id":3712,"date":"2021-07-15T03:58:00","date_gmt":"2021-07-15T03:58:00","guid":{"rendered":"https:\/\/www.irstaxapp.com\/?p=3712"},"modified":"2021-07-16T00:23:09","modified_gmt":"2021-07-16T00:23:09","slug":"1031-exchange-calculator-with-answers-to-16-faqs","status":"publish","type":"post","link":"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/","title":{"rendered":"1031 Exchange Calculator with Answers to 16 FAQs!"},"content":{"rendered":"\n<p><strong>What&#8217;s 1031 exchange? <\/strong>That is the first question that hovers one&#8217;s mind. A 1031 exchange means that an investor has reinvested the sale proceeds in a new like-kind property to defer all <a href=\"https:\/\/www.irstaxapp.com\/capital-gains-tax-calculator\/\">capital gain taxes<\/a>. This is a &#8220;popular term &#8221; for signifying the capital gains tax exemption law enshrined under 1031  of the Internal Revenue Code . <em><strong>IRC Section 1031 (a)(1)<\/strong><\/em> states as under :<\/p>\n\n\n\n<p class=\"has-background\" style=\"background-color:#f5f1de\"><em><strong>\u201cNo gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment, if such real property is exchanged solely for real property of like-kind which is to be held either for productive use in a trade or business or for investment.\u201d<\/strong><\/em><\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_62 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-66297d93c3887\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-66297d93c3887\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#1031_Exchange_Calculator\" title=\"1031 Exchange Calculator\">1031 Exchange Calculator<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#1_What_are_the_requirements_full_tax_deferral_in_a_1031_exchange\" title=\"1. What are the requirements full tax deferral in a 1031 exchange\">1. What are the requirements full tax deferral in a 1031 exchange<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#2_What_is_a_like-kind_property\" title=\"2. What is a like-kind property?\">2. What is a like-kind property?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#3Can_1031_exchange_be_used_for_a_primary_residence\" title=\" 3.Can 1031 exchange be used for a primary residence?\"> 3.Can 1031 exchange be used for a primary residence?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#4_Who_can_claim_1031_exchange_tax_deferral\" title=\"4. Who can claim 1031 exchange tax deferral?\">4. Who can claim 1031 exchange tax deferral?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#5_How_often_can_I_do_a_1031_exchange\" title=\"5. How often can I do a 1031 exchange?\">5. How often can I do a 1031 exchange?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#6_What_are_the_type_of_1031_Exchanges\" title=\"6. What are the type of 1031 Exchanges?\">6. What are the type of 1031 Exchanges?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#7_Is_there_a_timeline_for_1031_exchange\" title=\"7. Is there a timeline for 1031 exchange?\">7. Is there a timeline for 1031 exchange?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#8_How_to_identify_replacement_property\" title=\"8. How to identify replacement property?\">8. How to identify replacement property?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#9_How_much_does_the_1031_exchange_cost\" title=\"9. How much does the 1031 exchange cost?\">9. How much does the 1031 exchange cost?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#10_How_often_are_1031_exchanges_audited\" title=\" 10. How often are 1031 exchanges audited?\"> 10. How often are 1031 exchanges audited?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#11_When_to_report_1031_exchange\" title=\"11. When to report 1031 exchange?\">11. When to report 1031 exchange?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#12_How_to_report_1031_exchange\" title=\"12. How to report 1031 exchange ?\">12. How to report 1031 exchange ?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#13_Can_1031_exchange_be_used_for_improvements\" title=\" 13. Can 1031 exchange be used for improvements?\"> 13. Can 1031 exchange be used for improvements?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#14What_is_a_failed_1031_exchange\" title=\" 14.What is a failed 1031 exchange?\"> 14.What is a failed 1031 exchange?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#15_What_is_a_reverse_1031_exchange\" title=\" 15. What is a reverse 1031 exchange?\"> 15. What is a reverse 1031 exchange?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.irstaxapp.com\/1031-exchange-calculator-with-answers-to-16-faqs\/#16_Are_1031_exchange_expenses_deductible\" title=\" 16. Are 1031 exchange expenses deductible?\"> 16. Are 1031 exchange expenses deductible?<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1031_Exchange_Calculator\"><\/span>1031 Exchange Calculator<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<!DOCTYPE html>\n<html \u26a1>\n  <head>\n    \n    <script async src=\"https:\/\/cdn.ampproject.org\/v0.js\"><\/script>\n  <script async custom-element=\"amp-iframe\" src=\"https:\/\/cdn.ampproject.org\/v0\/amp-iframe-0.1.js\"><\/script>\n  \n  <\/head>\n  <body>\n  <amp-iframe\n  width=\"300\"\n  height=\"600\"\n  layout=\"responsive\"\n  sandbox=\"allow-scripts allow-same-origin\"\n  src=\"https:\/\/gsheetpress.com\/calculator?id=1626393284974\"\n>\n<amp-img layout=\"fill\" src=\"https:\/\/foo.com\/foo.png\" placeholder><\/amp-img>\n<\/amp-iframe>\n  <\/body>\n<\/html>\n\n\n\n<p>We have already published a 1031 exchange article like <a href=\"https:\/\/www.irstaxapp.com\/accomplish-1031-exchange-in-8-steps\/\">Accomplish 1031 Exchange in 8 Steps <\/a>! and <a href=\"https:\/\/www.irstaxapp.com\/real-estate-capital-gains-calculator\/\">Real Estate Capital Gains Calculator<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_What_are_the_requirements_full_tax_deferral_in_a_1031_exchange\"><\/span>1. What are the requirements full tax deferral in a 1031 exchange<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Well, for complete tax deferral, a person will have to acquire the property of equal or greater value and spending the entire net equity in the acquisition.This is also an answer to a very common question &#8220;<em>How much to reinvest under 1031 exchange?&#8221;.<\/em> In other words,if a taxpayer intends to avail a 1031 exchange for fully defer the capital gains tax on the sold property, two conditions must be fulfilled :<\/p>\n\n\n\n<ol><li>Reinvest the <strong><em>entire net sale<\/em><\/strong> proceeds in one or more \u201clike-kind\u201d replacement properties; and<\/li><li>Acquire one or more \u201clike-kind\u201d properties with the same or a greater amount of debt.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_What_is_a_like-kind_property\"><\/span>2. What is a like-kind property?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Or you may ask &#8220;<em>What is the 1031 exchange property<\/em>?&#8221;. The answer is simple. Like-kind properties are real estate properties situated with USA territory and must be similar to the property that you sold and claiming 1031 exchange benefit. Further, the like-kind properties must be held for business or investment purposes but do not need to be similar in grade or quality.  As per IRC, the quality of property does not decide if the property is like-kind or not. If the property is of the same nature or character as the one being replaced, even if the quality is different.&nbsp;The IRS considers real estate property to be like-kind regardless of how the real estate is improved.&nbsp;So, you can exchange a small flat in a building for a larger apartment elsewhere or for an office suite, or for vacant land. <\/p>\n\n\n\n<p class=\"has-background\" style=\"background-color:#feeeee\"><strong>The&nbsp;<a rel=\"noreferrer noopener\" href=\"https:\/\/www.congress.gov\/bill\/115th-congress\/house-bill\/1\" target=\"_blank\">Tax Cuts and Jobs Act of 2017<\/a>&nbsp;eliminated personal and intangible property from being included in tax-deferred exchanges. That includes items such as machinery, equipment, artwork, collectables, patents and intellectual property. Also , securities, stocks, bonds, partnership interests, and other financial&nbsp;assets&nbsp;do not fall within the like-kind properties definition. <\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3Can_1031_exchange_be_used_for_a_primary_residence\"><\/span><br>3.Can 1031 exchange be used for a primary residence?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>You can not use your primary residence or property for <strong>1031 exchange<\/strong>. That\u2019s because the property that you live in isn\u2019t being used as an investment property or being held for business purposes. However, there are some exceptions to this rule.&nbsp;<a rel=\"noreferrer noopener\" href=\"https:\/\/www.irs.gov\/pub\/irs-drop\/rr-14-02.pdf\" target=\"_blank\">IRC Section 121<\/a>&nbsp;of the Internal Revenue Code gives some situations where you can conduct a 1031 exchange converting your primary residence under section 121 to section 1031 rental investment property.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4_Who_can_claim_1031_exchange_tax_deferral\"><\/span>4. Who can claim 1031 exchange tax deferral?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Anyone who is the owner of investment and business property.So , individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity are eligible for the benefit of tax deferral under  Section 1031.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5_How_often_can_I_do_a_1031_exchange\"><\/span>5. How often can I do a 1031 exchange?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There is no fixed rule about number of times one can avail the benefit of section 1031 exchange. So, you can avail of 1031 exchange scheme as many time as you want.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"6_What_are_the_type_of_1031_Exchanges\"><\/span>6. What are the type of 1031 Exchanges?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The most common types of 1031 exchanges are  :<\/p>\n\n\n\n<ol><li><strong>Delayed exchange<\/strong>-It means you dispose of one property by selling or relinquishing and replacement property is purchased during the allowed time.<\/li><li><strong>Simultaneous exchange<\/strong>-As the term suggests, you buy the replacement property at the same time , you sell the property.<\/li><li><strong>Delayed reverse exchange<\/strong>-In this type of 1031 exchange , you first buy&nbsp;the replacement property then sells or relinquish&nbsp;the current property.<\/li><li><strong>Delayed build-to-suit exchange<\/strong>&nbsp;with the current property replaced with a new property built-to-suit the need of the investor.<\/li><li><strong>Delayed\/simultaneous build-to-suit exchange<\/strong>&nbsp;with the built-to-suit property purchased before the current property is sold.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"7_Is_there_a_timeline_for_1031_exchange\"><\/span>7. Is there a timeline for 1031 exchange?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Yes, the timeline rules for  1031 exchange  states that <\/p>\n\n\n\n<ol><li><strong>T<\/strong>he replacement property must be <strong>identified <\/strong>within <strong>45 days.<\/strong><\/li><li>The replacement property must be purchased within <strong>180 days.<\/strong><\/li><\/ol>\n\n\n\n<p>Just remember that the 1031 exchange of properties must be completed in 180 days, <strong>not<\/strong> 225 days (45 days +180 days).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"8_How_to_identify_replacement_property\"><\/span>8. How to identify replacement property?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As per 1031 exchange timeline rule , you are allowed a strict 45 days to identify a replacement property.&nbsp;For the purpose of identification ,a legal description or replacement property address or even a submitted purchase agreement is sufficient identification. <\/p>\n\n\n\n<h5 class=\"wp-block-heading\">However, if you wish to purchase multiple properties, you may follow one of the following guidelines for identification of properties :<\/h5>\n\n\n\n<ol><li>Identify up to 3 properties of any value with the intent of purchasing at least one.<\/li><li>Identify more than 3 properties with an aggregate value that does not exceed 200% of the market value of the relinquished property.<\/li><li>Identify more than 3 properties with an aggregate value exceeding 200% of the relinquished property, knowing that 95% of the market value of all properties identified must be acquired.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"9_How_much_does_the_1031_exchange_cost\"><\/span>9. How much does the 1031 exchange cost?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The cost for a standard 1031 exchange  hovers between&nbsp;<strong>$650<\/strong>&nbsp;and&nbsp;<strong>$1,200<\/strong>. This cost is paid to your qualified intermediary Certain as fee . The cost of a reverse 1031 exchange which is a bit complex procedure , is  higher, in the range between  $3,300 to $7,800.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"10_How_often_are_1031_exchanges_audited\"><\/span><br>10. How often are 1031 exchanges audited?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Based on the available data on audit cases of 1031 exchange , it looks like there is no fixed formula to find out , how often IRS takes up audit of 1031 exchange .However , data suggests that the partnership 1031 exchange has the highest chance of being audited by IRS. You may note that before IRS may or may not audit your 1031 exchange , auditors will certainly scrutinize exchange thoroughly on following points :<\/p>\n\n\n\n<ul><li> if the replacement property is like kind, or <\/li><li>if the property was used in a trade or business or for investment, <\/li><li>if the  identification of a replacement property and exchange were within allowed time, <\/li><li>if the replacement property was of equal or higher value than the relinquished property, and any \u201cboot\u201d must be reported.<\/li><li>Whether there is a qualified intermediary involvement in 1031 exchange as defined under&nbsp;<a rel=\"noreferrer noopener\" href=\"https:\/\/www.law.cornell.edu\/cfr\/text\/26\/1.1031%28k%29-1\" target=\"_blank\">Treas. Reg. \u00a71.1031(k)-1(g)(4)<\/a>&nbsp;.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"11_When_to_report_1031_exchange\"><\/span>11. When to report 1031 exchange?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The rule of reporting is that you need to report exchange on the federal and state tax return for the tax year in which you transferred the sold or relinquished property even if the exchange was not completed in that same year.&nbsp; For example, if a taxpayer started an exchange in August of 2019, and completed the exchange in February of 2020, the 1031 exchange will be reported on their 2019&nbsp;tax return.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"12_How_to_report_1031_exchange\"><\/span>12. How to report 1031 exchange ?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Reporting of  1031 exchange is done by filing&nbsp;<a rel=\"noreferrer noopener\" href=\"https:\/\/www.irs.gov\/pub\/irs-access\/f8824_accessible.pdf\" target=\"_blank\">Form 8824<\/a>&nbsp;along with your federal income tax return.&nbsp; If you completed more than one exchange, you need to fill form 8824 for each exchange.&nbsp; Reporting form 8824 is extremely important as IRS will match the information with the form 1099-S filed by your settlement agent.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"13_Can_1031_exchange_be_used_for_improvements\"><\/span><br>13. Can 1031 exchange be used for improvements?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The answer is a definite yes .You <strong>can<\/strong>&nbsp; improve  a replacement property in a&nbsp;<strong>1031 exchange<\/strong> with &nbsp;tax-deferred dollar . This type of&nbsp;<strong>exchange<\/strong>&nbsp;is also referred to as a&nbsp;<strong>construction<\/strong>&nbsp;or build-to-suit&nbsp;<strong>exchange<\/strong> under which you can use the proceeds from the sale of your relinquished property to acquire replacement property  and use any excess sale proceeds to improve the acquired property as part of your 1031 Exchange transaction.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"14What_is_a_failed_1031_exchange\"><\/span><br>14.What is a failed 1031 exchange?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As the term suggests, a failed 1031 exchange is one that fails to satisfy the condition provided under section 1031. Most  common reasons for a failed 1031 exchange can be one of the following:<\/p>\n\n\n\n<ol><li><strong>You<\/strong> failed  to identify replacement property within 45 Days<\/li><li>The property received is not  substantially the same as the property identified.<\/li><li>You closed the property without a contract with a <strong> <\/strong>facilitator<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"15_What_is_a_reverse_1031_exchange\"><\/span><br>15. What is a reverse 1031 exchange?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In normal exchange , we sell or transfer a property and after that we get the replacement property .But in a reverse 1031 exchange the replacement property is purchased before the relinquished or old property is sold. The timeline of a reverse exchange is same as standard normal 1031 exchange rules.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"16_Are_1031_exchange_expenses_deductible\"><\/span><br>16. Are 1031 exchange expenses deductible?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Nothing clearly written about the deduction of exchange expense . But ,if you look to <a href=\"https:\/\/www.irs.gov\/pub\/irs-pdf\/f8824.pdf\" target=\"_blank\" rel=\"noopener\">IRS Form 8824<\/a>, that must be filed under 1031 exchange, it  provides that exchange expenses are to be deducted from the contract price in the determination of realized gain. So, it looks like one can deduct the exchange expense  attributable to sale of the property should be deducted from gross sale value, other selling expenses that may be excluded are transfer taxes, attorney\u2019s fees, recording fees and the cost of the owner\u2019s title insurance policy.<\/p>\n\n\n\n<p>In this regard, please note the  <strong>Letter Ruling 8328011,\u00a0<em>Mercantile Trust Co. of Baltimore v. Comm<\/em>, <\/strong>32 BTA 82 (1935), Rev. Rul. 72-456, 1972-2 CB 468 that qualified intermediary (QI) fees, escrow closing costs and broker commissions are exchange expense . Exchange expense however does not cover loan-related fees, such as prepaid interest, mortgage insurance fees, appraisal fees and lender\u2019s title insurance relate to the loan used to acquire replacement property [refer Treasury Regulation \u00a71.1031(k)-1(g)(7)] .\u00a0Loan costs are not included in the cost basis for the replacement property.\u00a0<em>See Rev. Rul.<\/em>\u00a070-360, 1970-2 CB 103,\u00a0<em>S&amp;L Building Corporation,<\/em>\u00a019 BTA 788 (1930). <\/p>\n","protected":false},"excerpt":{"rendered":"<p>What&#8217;s 1031 exchange? That is the first question that hovers one&#8217;s mind. A 1031 exchange means that an investor has reinvested the sale proceeds in a new like-kind property to defer all capital gain taxes. This is a &#8220;popular term &#8221; for signifying the capital gains tax exemption law enshrined under 1031 of the Internal [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":4858,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3],"tags":[212,1400],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/3712"}],"collection":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/comments?post=3712"}],"version-history":[{"count":0,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/3712\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/media\/4858"}],"wp:attachment":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/media?parent=3712"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/categories?post=3712"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/tags?post=3712"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}