1031 and appraisal costs

[John Hickey]

Looking for some input from investors with 1031 experience. I know that free advice is worth what you pay for it. So with that disclaimer and the knowledge that I have a QI and and a CPA. I would love to get some input outside of the professional advice I am receiving. I am doing a 1031 on 8 commercial properties I closed on my sale two weeks ago. I'm about to go into contract on the purchase. The appraisal cost is coming in pretty high. I knew this going in. I was under the impression I could use funds the 1031 QI Has to pay for acquisition costs, brokers fees, loan application appraisals etc. My QI has informed me that isn't the case. He says loan fees are a grey area. He won't give me advice on what to do except to say, it's could be seen as me touching the money. My accountant says he's never had this issue. He's only done them with residential purchases....conventional loans. No help there. Now I don't mind paying out of pocket for them I just had not thought of this issue and it means I'll have to move some money around, which will cost me. The lender wants me to pay up front for appraisals. Again I don't have a problem paying this....except I don't have the cash laying around. My problem, but I'm trying to figure out the best course of action. Basically my QI has told me that using money in the escrow account has two risks. First the IRS may see it as a loan cost and find it a reason to disqualify the exchange and the entire sales proceeds as a capital gain. Second the IRS again sees it as a loan cost but deems it as a disbursement and the amount taken is taxable. If anyone has had this issue before I would love to hear how you handled it. Again free advice is worthless, so I'll take it with a grain of salt. Thanks in advance.