Navigating 1031 Exchanges and Fractional Ownership
Realize a higher return through Arvasten's expertise in 1031 Tax Deferred Exchanges. 1031 Tax Deferred Exchanges allow sellers to defer capital gains tax and strategically reinvest in new opportunities. Through Arvasten’s associated professionals, explore fractional ownership options like Delaware Statutory Trust (DST) and Tenant-In-Common (TIC) investments to tailor your investment approach. We focus on your best overall end result, rather than any one investment property purchase, allowing you to maximize your returns.
Capitalizing on Tax Benefits
When selling an investment property, capital gains tax often poses a significant post-closing expense for the seller. We remind all of our clients, most times your true profit is not simply the amount shown on the “Cash to Borrower” section of the closing statement; but rather, what is left after you pay your taxes on that sale. Since 1921, the Internal Revenue Service (IRS) has introduced a mechanism allowing sellers to defer capital gains tax if they reinvest the proceeds in a replacement investment property that meets specific criteria. This concept has evolved into what is now recognized as the 1031 Tax Deferred Exchange. Completing a 1031 Tax Deferred Exchange allows sellers to defer capital gains tax by reinvesting the sales proceeds into another investment. Rather than incurring capital gains tax, these funds are exchanged into the new investment, ultimately benefiting the property owner by deferring the capital gains that would have had to be paid by the seller otherwise. To successfully use this great tool, there are very specific rules that must be followed. Arvasten has decades of experience in successfully navigating this process and is able to share this experience with our clients to ensure their highest overall return in a transaction.
Maximizing Returns
Strategic planning in advance enables investors to achieve a higher return on their investment portfolios over the years as properties are sold and purchased using the 1031 Tax Deferred Exchange. We collaborate closely with our clients and their related professionals, ensuring that clients fully leverage the benefits of this 1031 Tax Deferred Exchange strategy by adhering to specific guidelines throughout the process.
Fractional Investment Ownership
When finding the ideal property within the allocated timeframe proves challenging, investors have alternative options. The Delaware Statutory Trust (DST) and Tenants in Common (TIC) investments are often good options to consider for qualified investors. These offer fractional ownership in an individual or group of investment properties to help fully satisfy a 1031 Tax Deferred Exchange. Utilizing a DST or TIC, either as a standalone investment or in conjunction with a conventional real estate asset, can effectively satisfy the requirements of a 1031 Tax Deferred Exchange. These options provide a high level of flexibility, allowing investors to precisely match the amount of equity and debt needed to complete the exchange within their property type and investment return goals. Benefits of fractional interest investments encompass the ability to participate in a larger investment option with a more modest investment amount, access to product types typically unavailable at lower investment levels, investment in a property with attractive existing debt, and the opportunity to complete a 1031 tax deferred exchange in tandem with another investment, meeting the equity and debt requirements of the sold investment property.
Choosing Wisely
While conventional investment property purchases and both TIC and DST ownership structures have their respective advantages and disadvantages, it is imperative for qualified investors to consult with knowledgeable tax professionals to analyze each of their characteristics thoroughly. Connect with us to help you and your tax professional choose what are the best investment options for you.