Get Your Own 1031 DST Properties List

Section 1031 of IRC, also known as a 1031 exchange or a tax-deferred exchange, is an arrangement that allows investors to defer capital gains tax on exchanging an investment property for another like-kind property. By like-kind, the IRS means that properties exchanged using a 1031 exchange must be similar in nature. However, it doesn’t require them to serve the same purpose. In other words, any investment property can be exchanged for another using a 1031 exchange. Therefore, if you own a rental property or a multi-family apartment, you can exchange it for any other investment property and defer up to 100% capital gains tax using a 1031 exchange.

No limitation on the number of replacement properties…

While doing a 1031 exchange, one thing that you must keep in mind is that the market value of the replacement property must be equal to or greater than that of the relinquished property. In addition, the debt on both relinquished and replacement properties must also be equal. There is no limitation on the number of properties an investor can acquire as their 1031 exchange replacement property. A 1031 exchange investor can identify and acquire any number of replacement properties using any of the following rules –

• The Three-Property Rule – Using this rule, a 1031 exchange investor can identify up to three replacement properties. Not all the identified replacement properties need to be acquired, and it entirely depends on the investor whether they want to acquire one, two or all identified properties.
• The 200% Rule – This rule enables an investor to identify any number of replacement properties as long as the fair market value of all the identified properties doesn’t exceed 200% of the fair market value of the relinquished property.
• The 95% Rule – As per this rule, a 1031 exchange investor can identify any number of replacement properties as long as the market value of the property received at the end of an exchange is at least 95% of the market value of all identified properties.

A genuine case of a tax-deferred exchange –  

Catherine Walter, an enthusiast 1031 exchange investor, recently closed her third 1031 exchange in California. Catherine had a couple of investment properties that weren’t generating as much revenue as she would want them to. So she decided to relinquish one of them. The property which she relinquished worth $5 million. Now, if she had sold it out instead of doing a 1031 exchange, she would have to pay taxes on the capital gains.

Property’s value = $5 million
State Tax = 15% (approx) = $750K
Federal Tax  = 20% (as the property was held for more than 10 years)
                       = $1000K

Net profit = Property’s value – Taxes = $(5000,000 – 1750,000)
                   = $3.25 million

As you can see, Catherine would have lost $1.75 million in taxes had she sold her property. However since she went for a 1031 exchange, she saved those $1750K. Out of those $5 million, she invested $4.5 million in the new property, whereas the remaining $500K went into a DST that she finalized after going through the 1031 dst properties list that she had.

At the end of her exchange, Catherine had –

A new investment property worth $4.5 million, plus, fractional ownership in a large institutional-grade property (through DST investment).

You can also close your 1031 exchange like Catherine –

Spending a portion of 1031 exchange proceeds in DSTs is quite common. Accredited 1031 exchange investors often do that and it provides those tremendous benefits. However, before you proceed with your investment, it’s important that you consult an experienced 1031 exchange advisor. An experienced 1031 exchange advisor can help you in accessing the best 1031 dst properties list. In addition, they can also resolve all your queries.

 1031xchange.com can match you with up to three highly qualified 1031 exchange advisors. In addition, we also make sure that one of our advisors stays with every investor throughout the transaction. To speak to a 1031 exchange advisor, you can Call: 888-993-2835 or email us at info@1031xchange.com