1031 property

Do you have a backup plan for your 1031 Exchange

“Mark wanted to increase his investment potential. He decided to sell his 2-bedroom condo, which he had been renting to tenants and acquire a property with less management hassle using a 1031 exchange. Adhering to 1031 exchange guidelines, he appointed a qualified intermediary (“QI”) to administer the exchange process.”

The condo sold for the expected price, and Mark had 45 days to identify his three desirable replacement properties. He identified two replacement properties, which, in his opinion, would yield better returns. He notified his QI about the properties in the due 45 days identification period, and the process of acquiring the first property began.

Unfortunately, one of the property was claimed by a different party, and the other could not be closed due to unforeseen circumstances. By the time Mark was made aware that neither of the properties closed, there was not enough time left in the 180-day exchange period to acquire another property. Mark ended up canceling his exchange and paid a hefty sum of capital gain taxes. After paying taxes, Mark did not have enough cash left and could not acquire better income-generating property.

How could Mark have ensured a successful 1031 exchange?

Delaware Statutory Trusts (“DSTs”) provide 1031 exchange investors a decent backup plan. DSTs guarantee that 100% of exchange funds are invested in a replacement property, and the investors defer capital gains taxes.

Always ensure to identify a property within a DST as your third potential replacement property in the given 45 day identification period. If due to any reason you can’t acquire the first two properties, at least you won’t end up paying taxes. DSTs satisfy 1031 exchange requirements, and you will be able to complete your exchange successfully. Even in the cases of boot, DSTs are a desirable option.

If Mark had identified a property within a DST, he could have completed his 1031 exchange successfully and deferred paying taxes. 

Bottom line

DSTs are prepackaged and readily available. DST offerings can be acquired for as little as $25,000-$100,000. If you have identified a DST as a potential replacement property, you have a backstop to guarantee that your exchange will be completed successfully, and you can acquire investment-grade real estate.

Now you can sell your investment properties that have appreciated and lock in the profits without worrying. Don’t put your 1031 exchange at risk; put a Delaware Statutory Trust backup plan in place.

Choose us for a profitable 1031 Exchange

1031 Exchange process is critical, and it is suggested to seek guidance from expert professionals. For assistance and consultation regarding 1031 exchange call – 888-876-6005 or email us at info@1031sponsors.com.

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1031Sponsors.com is a web portal owned by Investment.Net, LLC. The company is functioning in the 1031 exchange market for more than 15 years. Neither Investment.Net nor 1031Property intend to act as a broker or sell any goods or services. 1031Sponsors does not offer legal or tax advice. Tax topics discussed are for educational purposes only and should not be considered professional tax advice. It's recommended that you discuss your situation with your tax or legal advisor. Distributing an investment in different assets or choosing alternative investments involves higher risks than traditional investments and shouldn't be taken for granted. All alternative investment strategies are sold along with a prospectus that discloses all risks, fees, and expenses. These investments are not tax-efficient, and an investor should consult with his/her tax advisor before investing. The investor should be prepared to bear loss knowing that financial risks are attached to such investments.

1031Sponsors help investors residing in the United States complete their 1031 exchanges by providing them well-researched and authentic information related to 1031 exchanges. Services listed on the website 1031Sponsors.com can be modified to make them relevant to the present investment situation in the United States. For additional information, please contact 888-876-6005.