1031 Expense-Realtor Commissions

[Travis Troxtell]

I just received back my tax prep from my CPA and it includes my first ever 1031 Like Kind Exchange. The CPA is not including an expense for agent commissions and therefore I am showing a taxable gain. For illustration purposes this was the transaction. This was a cash deal for a property sold in Alabama, purchased in Colorado, Texas resident. 

Property Sold, Sales Price: $660k

Property Purchased Sales Price $630k

Realtor Commissions: $30k

I should be showing $0 in taxable gains, correct? 

Is there a publication somewhere that I can point my CPA to? Do the expenses get reported somewhere on Form 8824? 

[Michael Plaks]

@Travis Troxtell

It is not an expense in its usual sense, i.e. it's not listed as a separate expense line on Schedule E. However, it's called costs of an exchange and should eliminate the capital gain from the calculation you presented.

That said, keeping the same property value (which you did) is only one part of the capital gain calculation. You also need to keep the same equity, so if your loan amount on the new property is higher, you might have created a taxable "boot" from it.

Given the timing, I recommend that you file an extension and then hire an experienced real estate accountant to double-check your return. Correctly reporting a 1031 on your tax return is not easy, and mistakes are very common.