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1031 intermediary fee treatment for Form 8824

Forum|Forum|4 years ago
March 20, 2022
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I'm in the process of filling out my 1031 exchange information and came across this situation:

I'm being asked to enter enter cash used but not received for exchange expenses. When I investigated it further it appears to be treated as a boot (or taxable money received) when looking at the form for form 8824 line 15 A.

Articles on many different exchange website's indicate that the intermediary exchange fees should be added to the basis and are normal customary fees (e.g. https://1031ex.com/1031-exchange-closing-costs.php ) so what is being asked for in this area and why? Should the wording after "cash received" be ignored entirely?

Also, the next screen asks for exchange expenses that are sales related. Shouldn't this include qualified intermediary expenses and also some fees for buying the replacement property? Same situation as prior paragraph - several 1031 exchange websites (e.g. IPX closing costs and Blogs on selling expense ) indicate some fees to buy the replacement property are considered part of the exchange process (e.g. Title fees) and should be considered exchange expenses.

Here is the another article completely going a different direction on the topic...with a focus on the word acquisition. ipx 1031 acquisition I'm under the impression TT went with this last article with a loan acquisition focus (mine was a no loan purchase btw and I still had to pay title fees to acquire), but it is a misinterpretation per the other two websites. Does anyone know?

Best answer by Mike9241

her's a link that may be able to assist you in properly completing the 8824

https://www.1031.us/wp-content/uploads/Form8824Workbookfor2017.pdf

the water balance is not included nor are certain other expenses that should be reported on schedule E. like real estate taxes, utilities, unpaid mortgage interest, HOA fees

M

Mike9241Answer

her's a link that may be able to assist you in properly completing the 8824

https://www.1031.us/wp-content/uploads/Form8824Workbookfor2017.pdf

the water balance is not included nor are certain other expenses that should be reported on schedule E. like real estate taxes, utilities, unpaid mortgage interest, HOA fees

Y

yarkn76Author

Thanks Mike,

It did assist in answering the question - intermediary fees shouldn't be treated as a boot, but as an exchange fee. Also, replacement property title fees should be treated as exchange related fees, but not replacement property loan acquisition fees. Btw, the water balance you saw in the pic was not included (thus the subtraction) in the closing cost (exchange related sales fees).

In sum, I'm under the impression I filled it out correctly, despite the misleading questions in this area. TT should clarify/improve this area a bit more IMO.