DST’s & Qualified Opportunity Zones
Not your ordinary 1031 exchange program. With our team of professional experts and resources specializing in Delaware Statutory Trusts (DSTs) and Qualified Opportunity Zones (QOZs). This program really gives you, the advisor, a competitive advantage above the rest!
Next Level Programs
Our member company Caitlin John has assembled a team of Professional experts and resources specializing in Delaware Statutory Trusts (DSTs) and Qualified Opportunity Zones (QOZs).
By working closely with your clients to not only understand their goals, objectives and risk tolerance but, we take it one step further. When it comes to advanced tax planning, we remove the complexity surrounding DSTs and QOZs and simplify it so our Clients can make an informed and educated decision. Whether it’s a 1031 Exchange of Real Estate, a Qualified Opportunity Zone to transfer highly appreciated assets, for example; Stocks, Art Work, Car or Coin Collections or your Family Business…. we seek to help clients utilize and maximize the current tax codes to their benefit.
Let’s Start With The 1031 Exchange
A 1031 Exchange is a transaction in which a taxpayer can sell one property and buy another without a tax consequence. This is generally done to avoid paying capital gains tax on the sale of appreciated property and/or property that has been substantially depreciated for tax purposes over numerous years. Thereby, substantially compressing their original cost basis for tax purposes.
IRS Code Section 1031 allows a taxpayer to take up to 100% of the proceeds from the sale of a property and purchase ownership in new property, while deferring the tax on the sale of that property.
What Is My Tax Exposure
Contingent on the type of property you sell, you may incur 6 different levels of taxes:
25% Depreciation Recapture
15% - 20% Long Term Capital Gains
Potential AMT Tax
3.8% NII / Affordable Care Act Tax
Increase in Ordinary Tax rate in the year of sale
State Long Term Capital Gains
Understanding The 1031 Exchange Basics
Seller arranges for the sale of property and includes exchange language in the sale contract
At closing, sale proceeds are deposited with a Qualified Intermediary (QI) or escrow agent
Seller identifies potential replacement property within 45 days
Seller completes purchase of replacement property within 180 days by directing QI to release funds for closing
Other Key Requirements:
- Must purchase replacement property of equal or greater value
- Must have equal or greater debt on the replacement property
- Must reinvest all proceeds to make the transaction completely tax deferred
Interesting 1031 Facts
Fractional Interest in the DST
1031 Exchanges via “DST” Advantages
- Monthly income stream, DST income can be passed on to surviving family members (spouses and children) without the worries of property management
- Tax Mitigation of federal and state capital gains taxes, ACA tax, and prevents increase of your current tax rates
- Flexible investment amounts provide the ability to easily split the proceeds into multiple DSTs if desired, creating greater diversification.
- Diversification can be geographic, by asset class, anticipated holding periods, management firms, leverage and more
- Schedule E deductions allows for the continued use of depreciation to tax shelter the income created. In addition, some DST properties are in states that have no state income taxes, like Florida or Texas, providing even more tax savings. This maintains and, in some cases, helps to improve your tax sheltering ability
- Personal guarantees are eliminated by DSTs utilizing nonrecourse loans
- Stepped up basis Allows for passing the appreciated asset to beneficiaries, thus avoiding the payment of capital gains tax forever!
- Newer Properties available, usually higher-end, and typically located in states with growing demographics