Have DSTs Replaced TICs for Real Estate Syndication?

Real estate syndications are commonly used by taxpayers conducting 1031 exchanges of real property. In this article, we are going to talk about the current state of real estate syndications and whether DSTs have effectively replaced TICs.

DSTs vs. TICs

To some degree, the old TIC (Tenancy-in-Common) syndications have fallen out of favor. There are still TIC syndicated deals out there and there are instances in which TICs are an easier method for putting together a consortium of buyers.

It’s most popular with friends and family who want to get together and acquire a property as tenants-in-common. I also see it with developers who want to bring in friends and family to buy the “dirt” that will eventually become a development.

However, by and large, DSTs have replaced TICs as the modality for real estate syndication. There is an enormous amount of money going into syndicated real estate right now – particularly DST syndications. There is not enough inventory in the securitized world to satiate the demand. As a result, some firms will have trouble because there will be clients knocking on the door wanting to get in when the deal is already buttoned up.

Contact CPEC1031, LLC

If you have further questions about DSTs or TICs, don’t hesitate to reach out to the team at CPEC1031. Our 1031 exchange intermediaries have over twenty years of experience facilitating exchanges of all shapes and sizes. Contact us today to learn more about how we can help with your 1031 exchange!

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

Delaware Statutory Trust – the Perfect Vehicle for Syndicating Real Estate

There are a few options available to taxpayers for syndicating real estate, but for many reasons, the Delaware Statutory Trust is king. In this article, we are going to discuss Delaware Statutory Trusts and why they provide the perfect vehicle for syndicating real estate.

What is a Delaware Statutory Trust?

A Delaware Statutory Trust is an entity into which syndicators put real estate. So at the top of the ownership, there's a trustee of the Delaware Statutory Trust and when investors come in and buy the beneficial interest in a Delaware Statutory Trust, those investors are deemed to have a proportionate share of the underlying real estate for tax purposes.

The Perfect Vehicle for Syndicating Real Estate

The Delaware Statutory Trust is the perfect vehicle for syndicating real estate because it qualifies for 1031 exchange. The brokerage houses that in the past said “sell your stuff, give me the money and I'll make up the difference with rapid and efficient investment” now can say “sell the property, give me the money and I'll reinvest it into a 1031 investment and manage that money for you like we manage the rest of your non-1031 investments.”

Moving Into Less Management Intensive Property

Right now, we’re seeing a strong trend to move from management intensive property into less management intensive property. People see an opportunity to sell their management intensive properties and transition to a place where they can perhaps travel and relax and not have to worry about the unexpected ownership crises that always crop up with management intensive real estate. Delaware Statutory Trusts provide a perfect vehicle for doing just that.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

Deferred Sales Trusts 101: What Beginners Should Know

A 1031 exchange is an excellent tool that allows you to defer the capital gains taxes when you sell real property. However, there are a lot of elements that can complicate any given 1031 exchange, and sometimes exchanges fail to meet the necessary requirements. This can be a devastating reality for taxpayers who were banking on tax deferral. Thankfully, there is an option that taxpayers can use in the event that their exchange fails – the deferred sales trust. In this article, we are going to focus on deferred sales trusts – what they are and how they can be a useful alternative to a 1031 exchange.

What is a Deferred Sales Trust?

A deferred sales trust is another way to defer your capital gains taxes on the sale of real estate (under section 453 of the Internal Revenue Code, rather than section 1031). In a 1031 exchange, you are required to roll your sales proceeds into replacement property, but in a deferred sales trust, you move those proceeds into other assets (bonds, REITs, mutual funds, etc.). This allows you to keep your money working for you over time, rather than having to pay capital gains taxes. It’s similar in to the 1031 exchange in that it allows for tax deferral, but the method is a bit different.

1031 Intermediary Services

CPEC1031, LLC works with clients across the country to facilitate 1031 exchanges of real estate. A 1031 exchange is a great way to defer your capital gains taxes when you sell real estate. As an added bonus, you get to keep your hard-earned money working for you in a continued real estate investment. 1031 exchanges can be utilized by any US taxpayer, which makes them extremely versatile! Contact us today at our downtown Minneapolis office to talk about your exchange with one of our qualified intermediaries!

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

3 FAQs About Deferred Sales Trusts

We’ve talked about Deferred Sales Trusts before and how they can be a viable alternative to 1031 exchanges. But there are a lot of questions surrounding DSTs. In this article, we are going to answer three frequently asked questions about deferred sales trusts.

Is a Deferred Sales Trust a Tax Loophole?

No, a deferred sales trust is not a loophole. Section 435 of the Internal Revenue Code (which defines DSTs) has been in the code for a long time, and many taxpayers sell property under installment arrangements. In short, DSTs are a completely legitimate tax strategy.

Will I Be Audited if I do a Deferred Sales Trust?

Audits are always a possibility, no matter who you are. However, contrary to popular belief, merely engaging in a 1031 exchange or deferred sales trust transaction does not make you a more likely target for an audit.

After Starting a DST, can I sell Additional Property?

Absolutely. After you have the deferred sales trust set up you can add additional properties. This can get a little complicated so make sure you are working with a qualified intermediary to make sure you have all of your details covered.

CPEC1031

At CPEC1031, LLC, we employ qualified intermediaries who specialize in 1031 exchanges of real property. With more than 20 years of experience, our team of intermediaries can walk you through every step of your exchange from beginning to end. Our primary office is located in downtown Minneapolis, but we work with clients throughout the state of Minnesota, the Greater Midwest, and across the United States. Contact us today to learn more about our 1031 exchange services and start deferring your capital gains taxes on the sale of real estate!

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

DST Property & the 95% Rule - What to Know

In regard to the 1031 exchange 95% rule, what specifics do you need to meet the identification requirements with a DST? Does the name of the DST fund and the name of the specific properties suffice? These are great questions that we’ll answer in this article.

Properties Inside a DST

The syndicator wholesaling the DST should be able to provide you with a detailed description of the property or properties inside the DST. I would suggest that you attach an exhibit to the Replacement Property Identification Form with the details:

• The distinctive name of the DST;

• The address or addresses of the property or properties inside the DST;

• The legal description of the property or properties inside the DST.

Generally, it is better to throw the kitchen sink at to unambiguously identify the replacement property. This is because the Treasury Regulation says:

Replacement property is identified only if it is unambiguously described in the written document or agreement. Real property generally is unambiguously described if it is described by a legal description, street address, or distinguishable name (e.g., the Mayfair Apartment Building).

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved