2936 S HARPER VALLEY WAY
Below is a brief introduction to 1031 exchanges. Here you will gain knowledge about key benefits, basic rules and guidelines, for successful implementation using a Delaware Statutory Trust.
In most circumstances, the use of a qualified intermediary is required to successfully complete an IRC Section 1031 tax-deferred exchange. Treasury Regulation refers to the entity that facilitates a 1031 exchange as a qualified intermediary. A qualified intermediary is sometimes referred to as an accommodator, facilitator, intermediary or QI, which it defines as follows:
-Is not the taxpayer or a disqualified person;
-Acquires the relinquished property from the taxpayer;
-Transfers the relinquished property to the buyer;
-Acquires the replacement property from the seller;
-Transfers the replacement property to the taxpayer.
C) The exchange agreement must expressly limit the taxpayer's rights to receive, pledge, borrow, or otherwise obtain benefits of money or other property held by the qualified intermediary.
The time requirements in a 1031 exchange are very specific. From the close of escrow on the sale of the relinquished property, a taxpayer must properly identify potential replacement properties within 45 calendar days and close on the replacement properties within 180 calendar days.
For exchange, purposes a like-kind replacement property means any property held for investment or business use. For Instance – A rental home could be exchanged for:
A DST is like-kind. Revenue Ruling 2004-86 (July 20, 2004) explains how a DST described in the ruling will be classified for federal tax purposes and whether a taxpayer may acquire an interest in the DST without recognition of gain or loss under section 1031 of the Code.
The common objective in a 1031 exchange is disposing of a property containing significant realized gain and acquiring a like-kind replacement property so there is no or little recognized gain. In order to defer all capital gain taxes, a taxpayer must balance the exchange by following these guidelines.
How do I replace debt with a Delaware Statutory Trust(DST)?
DST's secure non-recourse financing backed by the real estate within the trust. The average DST loans range between 45% and 65% loan-to-value. When an investor purchases an interest in a DST, the investor will inherit or be assigned a portion of the loan.
Example of a DST Purchase: