Income and deductions for a rental property during 1031 exchange

[gjc]

In 2018 I purchased a replacement property and in 2019 sold the relinquished property in a reverse 1031 exchange.  I have income for the replacement property, but no income from the relinquished property, for 2019.   (1) A variety of repairs were done to the relinquished property prior to sale.   Can these be deducted against the income from the replacement property?  (2) I incurred legal expenses in the form of exchange agent fees.  Can these be deducted against the income from the replacement property?  For each case, where would these deductions be entered in TurboTax?

[Anonymous]

Acquisition costs of the replacement property. Closing costs such as attorney’s fees, etc. which are incurred in connection with acquiring the replacement property cannot be deducted but add to the basis of the replacement property. In addition, the IRS considers fees paid to Qualified Intermediaries to facilitate a 1031 exchange to be acquisition costs. Accordingly, they are not an expense to be deducted from the proceeds of the relinquished property but rather an expense that is added to the basis of the replacement property.

on schedule e you show two properties the replacement property and the relinquished property with the income and expenses for each

[Anonymous_]

TurboTax makes entry of selling expenses (including exchange expenses) relatively simple; the expenses will be entered appropriately on Form 8824 by the program. 

Expenses, in the form of repairs, that relate to the rental of properties are entered, as usual, on Schedule E.