It is common for many Maryland and Virginia real estate investors to make re - pairs, updates, and improve - m e n t s t o enhance a relinquished property in preparation for listing with a real estate agent or broker. A commonly asked question by investors in the Mid-Atlantic region is, “Can I be reimbursed from the 1031 exchange for the costs associated with improving or repairing the property immediately before the sale?” The answer is “no, not without generating a tax consequence”. The reason for this is that any exchange proceeds an investor receives from a 1031 exchange are considered “boot” and are generally taxable to the extent the investor has a capital gain tax consequence. However, improvements an investor makes to improve a relinquished property can be added to the “cost basis” of the property. In the most simplistic terms, cost basis is the amount a property is worth for tax purposes. The cost basis changes over time and becomes known as the “adjusted basis.” The adjusted basis can be increased by capital improvements made to the property, and is reduced by depreciation deductions taken during the ownership period and other factors.