If you remember correctly, a 1031 exchange is a swapping of investment properties where you are not liable to pay any capital gains taxes. Officially known as Section 1031 of IRC, this unique investment strategy is one of the best ways to increase your investment post selling an old property. However, as nothing comes easily, to qualify for a 1031 exchange, you must abide by its guidelines. For example, you can only invest in a like-kind property when doing a 1031 exchange. There is no way you can trade an investment property for a primary residence or vice-versa.

Why are dates crucial in 1031 exchanges?

The IRS is quite strict when it comes to 1031 exchange deadlines. So, you cannot think of missing any. Within 45 days from the sale of your investment property, you must identify one or more replacement properties. Similarly, you will have 180 days in total to close your 1031 exchange. Though you may think a lot of time is left, the reality will surprise you. There are many disqualified 1031 exchanges. All because the investor could not close the identification on time. So, you better plan in advance and not take anything for granted.

What should you do if you’re running out of time?

There are fair chances that you may not be able to identify a replacement property during the initial phase of your identification. It’s quite normal, and you should not be worried. However, it certainly requires fast action. Either you can continue your hunt with the hope that you’ll get your desired property or invest in DSTs and get rid of your worry for once and all. You can do a 1031 DST Exchange and still be able to defer capital gains taxes.

What is a 1031 DST Exchange?

As mentioned above, you can only do a 1031 exchange on investment properties. A DST or Delaware Statutory Trust is a private trust that owns, manages, and sells investment properties. When you invest in a DST, you invest in one of the investment properties of that DST. This way, your DST investment qualifies as your 1031 exchange replacement property. With a DST investment, you can be assured of one thing – a regular flow of income for a long time.

Whether a 1031 DST Exchange or an individual DST investment, you must consult a team of experienced 1031 exchange advisors or an expert. When doing a 1031 exchange, possibilities are that things don’t work out in your favor. Having an expert’s assistance always helps in such adverse scenarios.

 

 

 

 

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