1031.Exchange INTELLIGENCE NETWORK
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TRANSACTION & CLOSING

Closing costs

Also called: settlement costs · transaction costs

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PLAIN-ENGLISH DEFINITION

Costs charged in connection with purchasing, selling, financing and closing real estate.

What it means in practice.

Examples can include title charges, legal fees, transfer taxes, commissions, lender costs, recording charges and prorations. Their tax treatment varies.

Why it matters.

Not every dollar on a closing statement is treated the same way for exchange or basis purposes.

Additional notes.

Examples can include title charges, legal fees, transfer taxes, commissions, lender costs, recording charges and prorations. Their tax treatment varies.

PRIMARY / REFERENCE SOURCES

Read the source material.

irs.gov ↗irs.gov/publications/p551
CONNECTED LANGUAGE

Related definitions.

Tax & BasisExchange expensesCosts incurred to structure and complete an exchange.Transaction & ClosingProrationAn allocation of income or expenses between buyer and seller as of the closing date.Transaction & ClosingEscrowAn arrangement in which a neutral third party holds money, documents or instructions pending satisfaction of stated conditions.
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