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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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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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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What is a “Reverse 1031 Exchange”

Unlike a standard 1031 exchange, where a property owner sells their property and then acquires a replacement property, a reverse 1031 exchange involves acquiring the replacement property before selling the relinquished property. Here are the general steps involved in a reverse 1031 exchange: Engage a Qualified Intermediary (QI): Just like in a regular 1031 exchange, it’s […]

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What is “Like-Kind”?

In a 1031 Exchange, a taxpayer can defer the capital gains tax on the sale of certain property if the proceeds are reinvested in a “like-kind” property. For 1031 exchanges, the definition of like-kind is relatively broad. In the context of real estate, like-kind generally refers to the nature or character of the property rather […]

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What is Identification and what are the rules?

The identification rules refer to the guidelines that investors must adhere to when identifying replacement properties in a 1031 exchange. There are two key identification rules: Three-Property Rule: Under this rule, the exchanger can identify up to three potential replacement properties. Regardless of their fair market value, you can identify three properties as potential replacements. 200% […]

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What is an UPREIT (721 Exchange)?

An UPREIT, or Umbrella Partnership Real Estate Investment Trust, is a real estate investment structure that allows property owners to contribute their real estate assets to a partnership in exchange for operating units in a real estate investment trust (REIT) that owns the partnership. UPREITs are commonly used in the United States as a tax-efficient […]

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What is Boot?

“Boot” refers to any portion of a 1031 exchange that does not meet the like-kind replacement property criteria. Most commonly this is in the form of “cash boot” and “mortgage/debt boot.” Cash boot occurs when an investor has uninvested proceeds from the sale of a replacement property. If they intend to do a 1031 exchange but do […]

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