Delaware Statutory Trusts & 1031 Exchanges – What You Need to Know

There are many options to consider when engaging in a 1031 exchange of real estate. In this article, we are going to talk about Delaware Statutory Trusts and how they can be utilized to your benefit in a 1031 exchange.

What is a Delaware Statutory Trust?

A Delaware Statutory Trust is a way of owning real estate. In a DST, there is a trustee appointed who is the figurehead owner of the property. The people who have invested in the trust (the beneficial owners) are not deemed to be owners of a trust for tax purposes. Rather, they are seen as owners of the assets within the trust. That means Delaware Statutory Trusts may be eligible for 1031 exchange.

Delaware Statutory Trusts & 1031 Exchanges

A Delaware Statutory Trust is a method for purchasing replacement property in a 1031 exchange. Here are some of the advantages of exchanging into a Delaware Statutory Trust:

• Passive Ownership – Not Management Intensive

• Portfolio Diversification

• Non-Recourse Debt (Typically)

If you decide to exchange into a DST, it’s a good idea to use the 200% rule, rather than the 3 property rule. Otherwise, the amount of properties in the Delaware Statutory Trust may exceed the requirements of the 3 property rule.

Delaware Statutory Trust Qualified Intermediaries

It’s important to work with a qualified intermediary if you are considering a 1031 exchange of real estate. An intermediary is your go-to resource for all things related to your exchange. They can prepare all of your required documents, answer all of your questions, and help you find suitable replacement property. At CPEC1031, LLC, our intermediaries have more than two decades of experience helping clients with their like-kind exchanges. Contact us today at our Twin Cities office to learn more about 1031 exchanges and how we can help!

• 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

In a 1031 Exchange, Do you Need to Receive All Identified Properties?

Property identification is one of the most difficult parts of a 1031 exchange. You want to make sure you find the right property for your needs and that the properties you identify fulfill the requirements of your 1031 exchange. In this article, we are going to talk about whether or not you need to receive all of your identified properties in a 1031 exchange of real estate.

Property Identification

Identifying your replacement property is an essential step in any 1031 exchange of real property. The first 45 days of your exchange period are set aside as your identification period. This is the time in which you have to identify in writing those replacement properties into which you want to exchange. Sometimes taxpayers will identify numerous properties during their identification period to keep their options open. But do you have to ultimately exchange into all of these properties when your exchange period comes to an end?

Identification Rules

If you are identifying property using the three property rule or the 200% rule, you do not have to exchange into every single property you identify. However, if you are using the 95% rule, you do need to exchange into at least 95% of the properties you identify during your identification period.

Commercial Real Estate Exchanges

A 1031 exchange can be nerve-wracking for first-timers and veterans alike. But having a skilled 1031 professional by your side will put your nerves at ease. The qualified intermediaries at CPEC1031, LLC have over two decades of experience facilitating exchanges for taxpayers throughout the United States. Our team can help prepare your documents, advise you on replacement properties, and answer all of your questions throughout the process. Contact us today to learn more about the 1031 exchange process and get your real estate exchange in the works!

• 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

3 Qualities to Look for in a Qualified Intermediary

Working with a qualified intermediary is perhaps the best thing you can do to ensure the success of your 1031 exchange. But it can be difficult to determine the quality of a given intermediary. In this article, we are going to discuss a few important qualities that make a great qualified intermediary.

Experience

When you’re looking to hire any professional, it’s important to consider their level of experience. This is true when hiring a plumber to fix your toilet, an accountant to do your taxes, or a qualified intermediary to facilitate your 1031 exchange. You want to make sure that your qualified intermediary has a good amount of experience facilitating 1031 exchanges.

Expertise

In addition to experience, you want to make sure your intermediary has the right expertise. Has your intermediary facilitated exchanges in your area (the state or city in which your property is located)? Have they conducted exchanges on this type of property before (apartment buildings, hotels, retail, etc.)? These are all important considerations as each location and industry can have its own unique hurdles.

Excellence

You also want to work with a qualified intermediary who provides excellent service to their clients. A good way to figure this one out is to look up client reviews of the intermediary and see if they are well regarded by their peers.

Save Money with a 1031 Exchange

If you’re thinking about saving money with a 1031 exchange, you’ve come to the right place. Contact the qualified intermediaries at CPEC1031, LLC today to start your exchange. Our intermediaries have over two decades of experience working with clients on all sorts of 1031 exchanges. We put that experience to work for all of our clients to ensure successful like-kind exchanges, no matter what type of property you’re buying or selling.

• 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

Does Minnesota Have Any Special Reporting Requirements for 1031 Exchanges?

Minnesota generally conforms to the federal internal revenue rules for 1031 real property exchanges. There is not any special withholding, follow-up tax reporting in subsequent years, or claw-backs for gains later recognized in other states (Minn. Stat. 290.01 Subd. 19). That being said, there are some interesting Minnesota statutes that relate to 1031 exchanges.

Minn. Stat. 289A.12 Subd. 16

Minn. Stat. 289A.12 Subd. 16. is a tax reporting statute that is aimed directly at qualified intermediaries. It states that the commissioner may by notice and demand require a qualified intermediary to file a return relating to transactions for which the intermediary acted to facilitate exchanges under section 1031 of the Internal Revenue Code. The return must include the name, address, and state or federal tax identification number or Social Security number of each of the parties to the exchange, information relating to the property subject to the exchange, and any other information required by the commissioner. 

Minn. Stat. 272.115

Minn. Stat. 272.115 – Certificates of Real Estate Value (CRV) are required by the State of Minnesota when recording a document that transfers real property with a purchase price of over $3,000. Technically a CRV is submitted with the county auditor in the county in which the real property is located when the deed or other document is presented for recording. If a property is being acquired as part of a like-kind exchange under section 1031 of the Internal Revenue Code of 1986, as amended through December 31, 2006, that must be indicated on the CRV form.

Minnesota State Deed Tax

Deed transferring property to the buyer [probably meaning exchangor] from intermediary should be taxed based on the fee charged by the intermediary. While deed transferring property to the intermediary should be taxed based on the value of the real property being conveyed.

• 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

The Similarities & Differences Between 1031 and 1033 Exchanges

1031 exchanges and 1033 exchanges both allow taxpayers to defer their capital gains taxes when selling property, but there are some notable differences between the two. In this article, we are going to explain the similarities and differences between the 1031 exchange and the 1033 exchange.

1031 Exchange

The 1031 exchange allows you to defer your capital gains tax on the sale of real estate so long as the property involved is used for investment purposes or in your trade or business. A qualified intermediary is required for this type of exchange, and you must complete your exchange within the allotted 180 day time period. All of your net proceeds from the sale of the relinquished property must be reinvested into the new replacement property.

1033 Exchange

1033 exchanges are only applicable when it comes to property that has been involuntarily converted or exchanged. In other words, section 1033 deals with property that has been condemned, destroyed, or stolen. Unlike the 1031 exchange, a 1033 exchange does not require a qualified intermediary. Instead, the taxpayer simply reports the exchange on Form 4797. There are also no time restrictions for identifying replacement property. However, the net proceeds still must be reinvested in a replacement property of equal or greater value.

Minneapolis Qualified Intermediaries

The qualified intermediaries at CPEC1031, LLC have more than two decades worth of experience facilitating 1031 exchanges of real estate. Our intermediaries are well versed in section 1031 of the Internal Revenue Code and can help guide you through the 1031 exchange process. Let us assist you and ensure that your like-kind exchange is flawless. Give us a call today to set up a time to chat with one of our intermediaries about your exchange. You can reach us at our main office in downtown Minneapolis.

• 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