Some people don't want to reinvest all of their money into a replacement property because they don't want to be that heavy in real estate or their financial advisor says it's not a good idea to be too concentrated in any one particular type of investment.
Doing a Partial 1031 Exchange
So taxpayers that have very low basis and high gains may entertain the idea of a partial victory or a partial 1031 exchange, knowing upfront that we're not going to defer every penny of tax and they're going to take some of that cash off the table and reinvest it into other non like-kind property to have a greater amount of diversity. In this scenario you can still defer a great amount of gains by acquiring enough of the like kind properties to satisfy their strategic desire to do a partial 1031 exchange.
Delaware Statutory Trust Alternative
Another way to get a lot of diversity in your 1031 exchange is to purchase an interest in Delaware Statutory Trust. DSTs are like a little mini portfolios in which there might be five or six different properties and those properties may be located in different business segments or different geographic segments of the country. So you could get both business and geographic diversity in your replacement property acquisitions by going into a DST. That's another way to break the money up and get a greater amount of diversity so that you don't have all of your eggs in one basket.
- 1031 Hotline: If you have questions about partial 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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