How are Transactional Costs Handled?
Some transactional costs paid by the Exchanger reduce realized and recognized gain and increase the tax basis of the Replacement Property. For instance, if the Exchanger receives $15,000 cash back in the exchange but applies $10,000 to the brokerage commission, the Exchanger will recognize only $5,000 taxable income and $10,000 will be added to the tax basis of the Replacement Property. Practitioners suggest that other transactional costs may also be deducted if paid in connection with the exchange. These costs typically include commissions, transfer taxes, finder’s fees, title insurance premiums, legal fees, intermediary fees, and recording fees.
