Posted by on Jul 12, 2013 in Creative Real Estate Strategies News | 0 comments

New 1031 Strategy

We are now using an additional 1031 strategy. As Ive mentioned in the past, the Deferred Sales Trust is a great opportunity to defer taxes when a seller wants to cash out and would still like to defer taxes. The Deferred Sales Trust can also be used when a replacement property/properties can’t be identified. The Deferred Sales Trust can prevent the failed exchange from becoming immediately taxable to the seller.

There’s another DST and its called a Delaware Statutory Trust. The Delaware Statutory Trust will buy a property/properties and then investors will invest in the trust and have a beneficial interest in the trust based on their investment. The DST will pay a month/quarterly to the beneficiary.  There are a couple of ways that this DST can be used in a 1031. First, lets assume that when the property/properties are identified as replacement properties,there are some proceeds left over which will become taxable to the seller.The DST can be used for the remaining portion of the proceeds and then there is no tax liability.Or perhaps an appropriate property can’t be identified and now the failed exchange becomes completely taxable.The DST can be used as one or more replacement properties and then at a later date, another exchange can occur from the DST properties into another replacement property/properties. that the seller would prefer. There are a number of moving parts but it is possible to use a Delaware Statutory Trust as a replacement property until the right replacement property is found.

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