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Another option for investing the proceeds of a 1031 exchange is a Delaware Statutory Trust (DST).
It is sometimes challenging for an investor to find replacement property that suits their investment objectives and acquire it within the period specified in 1031 exchange requirements. Properties held in Delaware Statutory Trusts can provide attractive options.
A Delaware Statutory Trust is a legal entity created under Delaware law. An investor need not live in Delaware to invest in a DST. A DST may have any number of investors; each investor owns a fractional interest in the property. Ownership in a DST can enable a real estate investor to own a portion of a larger and more stable property than they might otherwise afford. And, an investor could own an interest in several DST's to diversity their investments. As with any investment, please consult with your tax and legal professionals for advice and guidance regarding specific investment choices.
The 2004 IRS Revenue Ruling 2004-86 specifies that ownership in a DST qualifies as replacement property for purposes of a 1031 exchange.
Contact us today to talk with an expert about using a Delaware Statutory Trust to defer your capital gains taxes.