Buying, managing, and selling properties are the three mainstays of the real estate investment industry. Many people who self-manage or hire a third-party management business to oversee their investments eventually choose to liquidate their holdings.
It's possible to defer the capital gains tax imposed on the sales of the investment property through a "like-kind" or 1031 exchange, which permits the owner to reinvest the proceeds from the sale of one property into the purchase of another property, subject to certain conditions.
Investors, however, should be informed of a popular alternative to the traditional 1031 exchange: the Delaware Statutory Trust, which offers significant tax advantages.
A DST (Delaware Statutory Trust) is a separate legal entity established under Delaware laws to hold titles to one or more commercial properties to earn revenue. Apartment complexes, stores, offices, factories, and other commercial spaces are all acceptable options for a DST replacement property offering which helps you defer capital gains taxes.
A single Delaware Statutory Trust can own one or multiple properties inside of the trust. Keep in mind that if the DST owns property in more than one state, it may be required to submit separate tax returns in each of those states.
Each investor has a "beneficial interest" in the trust that holds title to the Real Property, which means they are entitled to receive their fractional interest of the Delaware Statutory Trust's income and growth in value.
There are several reasons for real estate investors to consider the DST option, such as the following:
DST investments are a popular investment vehicle. Income potential, passive ownership, and easy access to institutional-grade properties are a magnet for many investors. Want to know more about Delaware Statutory Trusts? Our team of 1031 Exchange advisors will help you with all the information you need about DSTs for 1031 Exchanges.
You can schedule a consultation with the Pivot Professional Partners’ team through this Contact Us form. If you prefer to discuss your requirements regarding DSTs and the 1031 Exchange process over the phone, feel free to speak with our experts at (631) 275-1444.
While a 1031 is considered a tax strategy, we are not tax advisors, and you should consult your tax professional before investing.