Benefits of working with a Registered Investment Advisor (RIA) for Delaware Statutory Trust (DST) 1031 Exchange
When considering Delaware Statutory Trusts (DSTs), it’s important to work with an investment fiduciary, like Sera Capital, who will waive commissions and work on a transparent, up-front consulting basis. Clients working with an RIA receive more beneficial interest (more shares) with each DST. We believe we are setting the standard for how DSTs will be built in the future. When clients work with an RIA like Sera Capital, we believe they can expect:
- Up-front cost
- No hidden fees
- Deals that we believe are in the clients’ best interest
How Delaware Statutory Trusts Can Help your Clients
- Defer long term capital gains and depreciation recapture
- Receive tax-advantaged income
- Provide heirs with a stepped-up cost basis
- Assist in estate planning
- Unwind real estate positions
- Ensure that real estate transactions close in the 45-day identification period
- Match debt and equity
- Solve the “boot” problem, when relinquished property costs more than the replacement property
- Acquire vacant farmland or real estate for development
- Sell their businesses when properties and land are part of the conditions of sale
What is a Delaware Statutory Trust?
A Delaware Statutory Trust (DST) is a business trust created under Delaware law. DSTs can be used in a wide variety of business settings, and have become popular pass-through entities to hold commercial real estate assets for investors.
Upon the sale of a property in a DST, the investor will have the option to pay any capital gains tax or defer any capital gains tax by participating in a 1031 exchange.
Property Exchange: The 1031 Transaction
Section 1031 of the Internal Revenue Code allows an investor to defer the payment of capital gains taxes that may arise from the sale of a business or investment property. By using the proceeds of the sale to purchase “like-kind” real estate, taxes may be deferred, as long as the investor satisfies certain conditions. We offer replacement properties for investors participating in an exchange.
What is Like-Kind Real Estate?
To complete a successful Section 1031 tax deferred exchange, the replacement property must be like-kind to the relinquished property. Some examples of like-kind properties include:
- Retail Centers
- Office Buildings
- Industrial Warehouses
- Multifamily Apartments
- Student Housing
- Self-Storage Facilities
Any real estate held for productive use in a trade or business or for investment purposes is considered like-kind. A primary residence would not fall into this category, however, vacation homes or rental properties may qualify.
A Typical 1031 Exchange Has Three Basic Steps
- Exchanger sells property, known as the relinquished property, and proceeds are escrowed with a Qualified Intermediary (QI)
- Qualified Intermediary, through a written agreement with the investor, transfers funds for purchase of replacement property
- Exchanger receives new property (or DST interest)
Property Exchangers Must Follow a Set Timeline
- Day 1 – Sell Your Property
- By Day 45 – Find a Replacement
- By Day 180 – Close on New Property
We will work closely with you as we do with any of our clients to determine the best solution for your 1031 Exchange. Contact us today.