Understanding Basis in a 1031 Exchange

Understanding Basis in a 1031 Exchange

When discussing 1031 exchanges, the concept of ‘basis’ becomes crucial. But what does it mean in the context of a 1031 exchange? Essentially, the basis of the replacement property acquired in a 1031 exchange is the same as the basis of the relinquished property, subject to certain adjustments. This basis carries over from your old […]

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Avoiding Boot in 1031 Exchange

How to Master Boot in 1031 Exchanges

Understanding Boot in a 1031 Exchange A 1031 exchange allows real estate investors to defer capital gains taxes on the exchange of like-kind properties. However, not all exchanges are completely tax-deferred. Sometimes, you might receive some taxable proceeds—known as “boot”—during your exchange. Boot can include cash, non-like-kind property, or relief from debt that doesn’t match […]

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Key Due Diligence Tips for Executing a Successful 1031 Exchange

The Investor’s Checklist for Due Diligence in a 1031 Exchange

A 1031 exchange offers a strategic avenue for deferring capital gains taxes while expanding your commercial property portfolio. However, the process requires meticulous planning and an understanding of critical due diligence steps to ensure its success. Here are twelve essential tips derived from decades of industry experience to help guide your next 1031 exchange. 1. […]

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Air Rights 1031

Understanding the Value and Tax Implications of Air Rights

In the evolving landscape of real estate development, understanding and leveraging air rights—often referred to as “development rights”—can be crucial. Air rights pertain to the unused potential of a property, defined by state or local laws, allowing for vertical expansions or other developments that would not typically be permissible. The strategic use of these rights […]

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Step-up in cost basis within a DST

Financial Impact of Cost Basis Step-Up

In the context of a Delaware Statutory Trust (DST), a step-up in cost basis typically refers to the adjustment of the tax basis of the assets held by the trust when there is a change in ownership or when certain events occur, such as the death of a beneficiary or a transfer of ownership interest. […]

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1031 Exchange Eligibility and Key Requirements

1031 Exchange Eligibility

Diving into the intricacies of 1031 Exchanges requires a thorough understanding of its requirements, given its role as a strategic tool for deferring taxes on real estate investments. Key to leveraging this tax-deferral mechanism effectively is ensuring that the participating entity is a taxpayer in the United States, encompassing a wide range of entities such […]

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Grantor Trust Letters

Navigating Delaware Statutory Trusts: Grantor Trust Letters and Tax Reporting for Beneficial Interest Owners

Delaware Statutory Trusts (DSTs) have gained significant popularity among real estate investors for their flexibility, asset protection, and tax deferral advantages. However, understanding the intricate details of DSTs, particularly grantor trust letters and tax reporting requirements, is crucial for beneficial interest owners to maximize the tax benefits and mitigate risks associated with these investment vehicles. […]

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Utilizing DSTs for Remaining 1031 Proceeds (Cash Boot)

Utilizing a Syndicated Replacement Property in a DST Structure for Completing a 1031 Exchange

To defer tax when selling an investment property, investors must adhere to the Internal Revenue Service (IRS) regulations for a like-kind exchange under Section 1031. Even if an active real estate investor has identified a commercial investment property for exchange, a Delaware Statutory Trust (DST) can be instrumental in ensuring the exchange’s success. DSTs Enhance […]

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1031 vs 1033 Exchanges

1031 vs 1033 Exchange

A 1031 exchange and a 1033 exchange are both tax-deferral strategies related to the relinquishment of business or investment real estate and both are allowed under the Internal Revenue Code (IRC) of the United States. However, they each have unique applications that apply to different situations. 1031 Exchange: Whenever you voluntarily sell business or investment […]

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“Swap and Drop” vs. “Drop and Swap”

Understanding 1031 Exchanges: “Swap and Drop” vs. “Drop and Swap”

Introduction As a savvy real estate investor, you’re well aware of the tax benefits that 1031 exchanges offer. These powerful tools allow you to defer capital gains taxes when selling one investment property and acquiring another like-kind property. However, the intricacies of dealing with partnerships and LLCs can be as complex as navigating a multi-story […]

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Replacing debt in a 1031 exchange

Understanding Debt Replacement in a 1031 Exchange

A 1031 exchange enables investors to defer taxes on capital gains by reinvesting the proceeds from a sold property into a new one, with a caveat: the full proceeds must be reinvested, including the loan amount from the sold property. If the relinquished property had a loan that was paid off at the sale, to […]

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Depreciation Recapture Article

Depreciation Recapture

Depreciation Recapture Tax Most investors are familiar with, and prepared for, the concept of capital gains tax, where taxes are owed on the profit realized from the sale of a capital asset. However, the taxes that investors often least expect are those imposed when a capital asset, which has been depreciated, is sold. What is […]

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How CFPs Drive Success in 1031 Real Estate Exchanges

A Certified Financial Planner (CFP) can play a significant role in a 1031 Real Estate Exchange, which is a strategy used to defer capital gains taxes by exchanging one investment property for another. Here are some key roles a CFP might undertake in this process: Financial Analysis and Planning: They help clients analyze the financial […]

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Underwriting 1031 Exchanges

The Art of Underwriting a 1031 Exchange Replacement Property

Underwriting a 1031 Exchange Replacement Property is a meticulous and essential process for real estate investors looking to optimize their portfolios while deferring capital gains taxes. This article will provide a comprehensive insight into how an underwriter approaches the task of underwriting these assets, ensuring investors make informed and strategic decisions. Understanding the Significance of […]

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Estate planning using DSTs

Considerations for using a Delaware Statutory Trust in estate planning A Delaware Statutory Trust (DST) is a legal entity that can be used for various purposes, including real estate investments and, in some cases, estate planning. When it comes to estate planning, DSTs are often employed in the context of 1031 exchanges, which allow individuals […]

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