1031 exchanges provide a unique tax-deferral tool for all appreciated real estate assets. Highlighted in the Internal Revenue Code Section 1031, “real property can be exchanged solely for real property of like-kind,” giving taxpayers the ability to defer capital gains tax, as well as depreciation recapture tax and investment income tax, on the sale of appreciated property. “Like-kind” properties may qualify as any property held for business or investment purposes, including land, multifamily, industrial, office, medical, retail and storage to name a few.
While many people are familiar with 1031 exchanges, not many have yet discovered Delaware Statutory Trusts (DSTs), and all of their potential benefits in the 1031 exchange process. In addition to the deferral of all applicable taxes, a DST offers the following additional benefits:
- Effective for partial exchanges – avoid the pitfall of taxable boot
- Access to institutional commercial real estate
- Completely passive management – no management responsibilities whatsoever
- Tax-sheltered monthly income
- Diversification of land and ranch assets
- Institutional financing as well as all cash/no debt options
- Cash-our refinancing options for potential liquidity
- Easy to identify and close in 2-3 days
We work with landowners across the country, providing fiduciary guidance on DST replacement options. Often times we are able to help complete an exchange where the relinquished value and the replacement value do not match, leaving the landowner with “taxable boot.” Delaware Statutory Trusts may offer a great solution to fill the gap and eliminate this boot, all while diversifying their real estate portfolio and potentially increasing their income.
Example: Landowner recently sold property for $5m and has identified replacement property for $4.3m. They now have the decision to find an additional $700k of replacement land or pay taxes on that $700k. Utilizing DSTs as a solution, the landowner can invest in a portfolio of real estate assets that diversify their holdings and likely increase monthly cash flow.
Clark Wealth Strategies’ Fiduciary1031 Exchange Process
At Clark Wealth Strategies, we provide clients with methodical, fiduciary guidance throughout the entire 1031 exchange. We have established a unique process to help facilitate exchanges for clients all across the country, eliminating conflicts of interest and saving them thousands of dollars in unnecessary commissions.
Because of our independence, we are not beholden to any parent company or broker/dealer. No one is giving us a menu of investments that are to be sold to our clients. Instead, we have the freedom to use any solutions and strategies we choose, as long as it is in the best interest of our clients.
Utilizing Delaware Statutory Trusts (DSTs) and other strategies, we are able to create broadly diverse replacement real estate portfolios. DSTs allow for fractional ownership of commercial real estate and easy diversification across asset class and geography.
Any sales commissions or broker/dealer fees normally associated with DSTs are credited back to our clients in the form of additional DST equity. The end result is a very diverse replacement real estate portfolio, additional equity and a higher tax-sheltered monthly income.