Section 1033 exchange

[appelman]

In a Section 1033 exchange, what, if any, of the buyer's expenses incurred in purchasing the replacement property will increase the purchase price for the purpose of figuring the amount of gain that can be postponed?

[S T]

Link

Maybe this will help Exeter has a good overview.

try http://www.exeter1031.com/section_10...enue_code.aspx

Sandy

[appelman]

A good reference

Many thanks. But, unfortunately, it doesn't seem to address my question. My gut feeling is that only amounts paid to the seller (or possibly on behalf of the seller) will increase the purchase price. I have a client bugging me on this, since he wants to pay for his replacement property the barest minimum that will save him from recognizing gain.

[Gary2]

Since the postponed gain will lower the basis of the new property, my intuition is to include any costs that would normally be part of the basis - appraisal fees, attorney fees, filing fees, etc.

I don't have a citation to justify this, but it seems obvious to me.

[S T]

Appleman

Maybe I am not understanding your OP

There are always costs associated with escrow regarrdless of whether it is an exchange 1031/1033 or a regular purchase.

My belief would be that associated costs(escrow, title apprasials, etc) on the replacement would be added to the calculated replacement basis.

Try this link https://www.1031cpas.com/search/inde...52&search.y=12

Takes you to a worksheet - which shows costs associated

1033 follows mostly the same rules as 1031


Sandy

[appelman]

Not quite my question

Escrow costs that are not currently deductible are added to basis, or, in the case of loan fees, amortized, but can they really be added to purchase price in determining whether there is gain that must be currently recognized? Can you point me to anything that explicitly addresses this?

Let me give you my specific case: A rental property burns down. Basis is 400K, cumulative depreciation is 200K. An insurance settlement of 900K is received, and the land is sold for 900K, with 100K of selling costs. The total "sales price" is then 1.7 million; the realized gain is 1.5 million. To postpone all of the gain, the cost of the replacement property must equal or exceed 1.7 million. If non-deductible escrow costs are 100K, and the purchase price is 1.6 million, can all of the gain can be postponed? If so, again, I'd like to see something that explicitly addresses the question..