Shield your Capital with a DSTno tax

Here's a little know way to shield your capital gains against taxes.  

Do you own investment property that you would like to sell, but don't want to take the tax hit?

As you may know Section 1031 of the Internal Revenue Code provides a means to defer capital gains taxes that arise from the sale of a business or investment property.  By exchanging your property for like-kind real estate  you may defer taxes and use your proceeds to buy a replacement property.  Of course there are guidelines for transacting this exchange and it can be done properly to your advantage.

Here's the little known angle on this exchange idea.  Say you want to sell your investment property because you don’t really want to manage property anymore or don't want to take the risk of trying to find a like-kind property in a rapidly selling market.  Then consider a Delaware statutory trust or DST.  This permits a fractional ownership where multiple investors can share ownership in a single property or a portfolio of properties.  A DST removes the decision making responsibility away from the investor and uses an experienced sponsor affiliated trust. 

Here are a few benefits of a DST 1031 exchange:

  1. You no longer have any management responsibilities.
  2. You have access to high quality properties where you wouldn't normally be able to invest.
  3. You limit your personal liability.
  4. You can diversify your investment across property types.
  5. For estate planning all 1031 exchange investments receive a step up in cost basis so your heirs will not inherit capital gains liabilities and they won't have the burden of management.
  6. Eliminates the potential left over "boot" that would otherwise be taxable.
  7. As the investor you can swap properties in the DST structure until the investors death.

This is a great potential alternative if you are tired of managing your investment properties and do not want take a huge tax hit for yourself or your family.  You can sell your local property and roll it into a DST with peace of mind.  You should always consult a tax advisor regarding a 1031 exchange.

If you would like more information on the value of your current property or more information on a DST and how it works give me a call.