Delaware Statutory Trusts 101

Delaware Statutory Trusts 101

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Investors looking to reinvest profits from the sale of an asset know that it’s a delicate process. After all, they don’t want to expose their earnings to capital gains taxes if they are planning to reinvest the money quickly. However, investors often find themselves switching strategies or opting to invest in other classes of real estate. That’s where 1031 exchanges, so named for the section of the tax code that enables them, enter the picture. This strategy allows investors to defer capital gains taxes, provided they use the money from the sale of a property to invest in another. In the early 2000s, a legal structure, known as “tenancy in common,” or TIC, was a leading investment vehicle for 1031 exchanges into commercial real estate projects. When investors are tenants…
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The Rules of a 1031 Exchange

The Rules of a 1031 Exchange

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Generally, profits earned on the sale of property are subject to capital gains tax. A common strategy for deferring capital gains is to complete a section 1031 exchange. The term “1031 exchange” refers to section 1031 of the Internal Revenue Code, which allows investors to defer paying capital gains taxes on an investment property following a sale. To defer capital gains, the investor must purchase, or roll into, another “like-kind” property with sale proceeds from the initial investment.  If you are considering utilizing a 1031 exchange in the sale of an investment property (the “relinquished property”) and purchase of another (the “replacement property”), there are important rules you must follow to ensure that the transaction is eligible. These include:  Generally, the properties exchanged must be real estate, even if they…
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