3 DST Considerations for Financial Planners

DSTs can be complicated. In this article, we are going to talk about three things financial planners should consider when approaching DSTs.

Leverage

One important thing to consider is whether or not there is leverage on the replacement investments and is that debt allocable to the co-purchasers in the DST? Some DSTs are 50% levered – the underlying assets already have debt on them up to 50%. So when you put a dollar into that DST and you’ve allocated the 50% leverage, your real buying power is 2 dollars for every dollar that you put in. That’s going to be important when you’re determining your ceiling under the 200% rule because the value of what you’re buying isn’t just the equity that you’re putting in, but also the debt that’s allocable to you. Be aware that if you’re buying a leveraged DST, that DST may take up more bandwidth under the 200% rule than you had anticipated.

Tax Documents

The next thing to think about is what kind of tax document the DST sponsor is going to send you for completing your taxes. You may receive an alternative 1099 while you’re in the DST stage. If that DST then later converts under a 721 contribution to an UPREIT, you may eventually receive a K-1. So talk to the DST sponsor and understand what tax documents you’ll be receiving.

Identification

Another thing we need to discuss is identification. You still need to identify the underlying real estate that’s comprised of this DST. You want to ask the DST sponsor if they can provide you with the address, legal description, county tax assessor’s numbers, etc. You want to be able to clearly and unambiguously describe that real estate and it would be wonderful if the sponsor could simply provide you an exhibit that gives the full description of the underlying assets. You can append that to you identification form to fully identify what you’re getting as part of the DST.

1031 Exchange Company

The 1031 exchange professionals at CPEC1031, LLC have been working with taxpayers on their like-kind property exchanges for more than twenty years. Our team has the resources and skills needed to make sure your exchange is a success. We can walk you through the process step by step and ensure all of your questions are answered as they arise. Contact us today to learn more about our services. You can find us at our downtown Minneapolis offices. Be aware that we provide 1031 exchange services to taxpayers throughout the United States.

• 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

How to Treat Unsecured Debts in a 1031 Exchange

Many people have questions about the tax treatment of unsecured debts in a 1031 exchange, especially if the (requisite) satisfaction of which appear to not be tied contractually to the sale of the relinquished property.

Boot gain may be realized in an exchange paying debts not secured by a mortgage or deed of trust on the relinquished property.

It may be beneficial to discuss ways to create a contractual nexus between the sale closing and the payment of the debts. This would involve including a material and substantial requirement in the purchase agreement with the buyer; or restating the notes with your lenders to change the terms and add a requirement of satisfaction upon sale of the subject real estate.

Defer Capital Gains Tax with a 1031 Exchange

A 1031 exchange can help you defer capital gains tax on the sale of investment real estate. A qualified intermediary can guide you through the exchange process and make sure everything goes off without a hitch. At CPEC1031, LLC we have been working on like-kind exchanges for over twenty years. Give us a call today to learn more about the tax-saving benefits of a 1031 exchange. You can find us at our primary offices in downtown Minneapolis. We provide like-kind exchange services to taxpayers across the United States.

• 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

How to Tell if Your Property Does Not Qualify for 1031 Exchange

There are many factors to consider when considering a 1031 exchange, but the first and most important is determining whether or not your property even qualifies. In this article, we are going to talk about how you can tell if your property does not qualify for 1031 exchange treatment.

Some Property is Disqualified Outright

Some property is disqualified outright from Section 1031 of the Internal Revenue Code. Specifically, personal property cannot be used in a 1031 exchange transaction. That means you cannot exchange any property that is used for personal reasons. This includes your primary residence, and other items of non-real property used for personal use like artwork, agricultural property, and aircraft.

Qualified Investment Real Estate

All property included in a 1031 exchange must be real estate that you hold for a qualified purpose. Specifically, that qualifying purpose is investment or business use. Some common examples of property used in a 1031 exchange include: apartment buildings, duplexes, hotels, retail space, and more. You are allowed to exchange into and out of different business segments, as well as different states and locales. So long as you ensure that both your relinquished and your replacement properties fit the definition of qualified investment real estate.

Start the Like-Kind Exchange Process Today

Get started with the like-kind exchange process today by contacting CPEC1031, LLC. Our team of qualified intermediaries can walk you through all the intricacies of the 1031 exchange process, making sure you are well informed along the way. There are many potential pitfalls during the exchange process, and our intermediaries will make sure that you have all the information needed to avoid them. Reach out to our team today to learn about the exchange process and see how we can help you defer taxes with a 1031 exchange of reach 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

What to Know About 1031 Exchanges & DST Syndications

Many people have questions about 1031 exchanges involving DST syndications. In this article, we’re going to discuss a few things you should know about 1031 exchanges and DST syndications.

How Many Properties?

One of the critical things to ask regarding the identification of your DST is: “is this a single asset DST comprised of only one parcel, or is it a multiple asset DST comprised of numerous properties?” If it has multiple non contiguous parcels in it, remember that may violate the 1031 exchange three property rule. If that’s the case you may need to make your property identification under a different rule, such as the 200% rule.

Qualified Property

It’s always a good idea to ask your DST sponsor if what you are buying is qualified, like-kind property. Is it real estate or is it something else? For example, partnership interests are specifically excluded from 1031 exchange. Certain trusts or REITs may be excluded as well. There are authorities for properly setting up a TIC (tenancy in common) syndication but you need to be careful that those TIC syndications aren’t de facto partnerships. The same thing goes for DSTs. There are 7 deadly sins for properly setting up a DST and you want to make sure that your sponsor is adhering to those rules and setting up the DST correctly so that it’s considered an interest in real estate.

CPEC1031, LLC

If you are searching for a 1031 exchange company to assist you with your next like-kind exchange, you’ve come to the right place! CPEC1031, LLC has over two decades of experience facilitating real property exchanges across the United States. Our qualified intermediaries have the knowledge and expertise required to ensure you are able to defer 100% of your gains. Reach out to us today at our downtown Minneapolis office to learn more about our services and see how we can help you with your next transaction!

• 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved

Can Future Repairs Be Included In A 1031 Exchange?

If you’re interested in completing a 1031 exchange, there’s a chance that the property you are looking to acquire needs a little TLC. Maybe that farmland needs some new buildings or that apartment complex could use some upgrades if you’re hoping to acquire some more tenants. Many properties that clients are looking to exchange into could use some upgrades and repairs, but can funds that you acquire from the transfer of one property in a 1031 exchange be put towards repairs on an acquired property?

1031 Exchanges And Repair Costs

If you want to construct improvements to you replacement property, you may be able to pursue an improvement exchange. This exchange allows you to pay for a replacement property’s improvement costs with some of the 1031 exchange funds. If you are considering this type of exchange, it’s imperative that you connect with a Qualified Intermediary to ensure everything is carried out as needed to avoid unexpected tax expenses down the road.

We’ll go over a real basic explanation of an improvement exchange below. Here’s what you’ll need to do in order to be eligible for an improvement exchange:

• Specific planned improvements must be outlined in an Exchange Agreement between you and the Qualified Intermediary before you begin the exchange.

• All improvements on the replacement property must be finished within 180 days of closing on the relinquished property.

If you are interested in possibly pursuing this type of exchange, or you want more information about your options when performing a standard 1031 exchange, look no further than the team at CPEC 1031. We’ve helped countless clients perform an exchange that helps them move into a new investment without incurring an unexpected tax burden, and we can do the same for you. For more information, or to talk with a member of our team, give us a call today at (612) 643-1031.

• 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.

© 2023 Copyright Jeffrey R. Peterson All Rights Reserved