Protecting your 1031 exchange from failing with the use of the Deferred Sales Trust™ as a default is a wise decision for any exchanger and their QI. By using the 1031 and the selected default method of the Deferred Sales Trust™ as a combination is a tax compliant strategy that allows the 1031 exchanger to defer their capital gains tax in the event that their 1031 fails. This can be accomplished through the use of the Deferred Sales Trust™ and in conjunction with a 1031 exchange.

Why is it so important to use the DST when considering the 1031?

With a typical 1031 exchange, if the exchanger fails to successfully complete the exchange, then the exchanger must pay all their capital gains taxes in that tax year. Capital gains taxes can be 15% to 35% for both federal and state, depending upon the state.

The reasons for a 1031 failure may be due to:

  • Not finding your replacement property
  • Not closing on the replacement property with the 180 day window
  • Debt replacement is hard to find
  • Financing the new property does not work out
  • The seller decides to change the terms of the deal
  • The property does not check out to be a good 1031 purchase
  • And so many other reasons...

The Solution - Is to protect your exchange if it fails with the Deferred Sales Trust™.

The DST is a tax compliant strategy that allows the 1031 exchanger to defer capital gains in the event that their 1031 fails. This is accomplished through the Deferred Sales Trust™ in conjunction with a 1031 exchange.

Benefits of the Deferred Sales Trust™

  • The deferral of capital gains taxes and straight line 1250 depreciation recapture
  • Exchangers can feel better about doing a 1031 exchange without the concern that it could fail and they would have to pay the tax
  • You can now exchange down and allow the boot to go into the

Deferred Sales Trust™

  • The DST installment sale provides for a stream of income that can be designed around your financial needs.

What is the Deferred Sales Trust™?

Those of us who own businesses, corporations, and commercial or residential investment real estate assets are often reluctant to sell because of capital gains taxes associated with the sale. But what other choice do we have other than a property exchange directed by a Qualified Intermediary? Is there another way to deal with the capital gains tax deficits that so many investors experience when they sell their real estate assets? The answer may lie in the Deferred Sales Trust™.

This capital gains tax deferral tool could save you thousands of dollars, and at the same time, you would then have the opportunity to potentially make a profit on the money you would have paid to Uncle Sam in the year of the sale. Obviously, this strategy is gaining popularity among those who have highly appreciated assets that are marked for sale. You too can potentially take advantage of this program once you understand how it works.
The options on when and how payments can be made are flexible. You may have other income and don't need the payments right away. The Deferred Sales Trust™ has the potential to generate more money over the long run than a direct and taxed sale.

Benefits of the 1031 Exchange

The tax deferred exchange, as defined in Section 1031 of the Internal Revenue Code of 1986, offers investors like you a great opportunity to build wealth and defer capital gains. By completing an exchange, you can liquidate your real estate investment, use all of the equity to purchase replacement property, and defer the capital gain tax and depreciation recapture that would ordinarily be paid. In addition, we offer expert property replacement location and acquisition services. Let us do the leg-work and help locate just the right investment for you.

What are the benefits of a 1031 Real Estate Exchange? The benefits of a tax deferred exchange are quite significant. Whether you owe a balance on your investment property or own the asset free and clear, with proper counsel, the 1031 Real Estate Exchange can help you improve your asset portfolio. Here are a few examples: Reposition assets in response to market changes and personal preferences, change property types e.g. land to
rental property, increase leverage by reducing taxes and increasing purchasing power, reduce management responsibilities and involvement permits you to personally relocate and reinvest at your new location, improve your cash flow, achieve property consolidation or diversification, construct improvements on a property.

To find out how the 1031 Real Estate Exchange and the Deferred Sales Trust™ can save you money on the sale of your next real estate investment, fill out the 1031 Real Estate and Deferred Sales Trust™ Tax Savings Illustration form to the right, we will provide you with a detail report on how the DST can save you capital gain tax and promptly forward it to you by email. If after thorough investigation, you find the1031 Real Estate Exchange does not won't work for you, please take a look at the Deferred Sales Trust™ as an alternative to the 1031. Let our tax attorney and the Qualified Exchange experts show you how to defer capital gains and depreciation recapture over your entire lifetime especially in circumstances where you need protect your exchange from failing or when you need to trade down or cash out.

Robert Binkele is the owner and CEO of the Estate Planning Team. As CEO of Estate Planning Team, Robert Binkele promotes the use of the Deferred Sales Trust™ or other estate planning techniques and is not responsible for recommendations made by members of the Estate Planning Team, including the Deferred Sales Trust or other tax, legal or estate planning strategies.
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