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Delaware Statutory Trusts - 1031 Exchange

A Delaware Statutory Trust (DST) is a separate legal entity created as a trust under Delaware statutory law that also qualifies under section 1031 as a tax-deferred exchange. ( Rev. Ruling 2004-86 ) The DST owns 100% of the fee interest in the real estate and permits up to 100 investors. Unlike a TIC where each of the 35 investors needs to qualify for their own loan, under the DST structure, the lender only needs to make one loan to one borrower, saving both the lender and the investor time and money. The managing trustee of the DST is usually the sponsor or an affiliate. This gives the lender greater security knowing that the sponsor will be operating the DST property.
  Delaware Statutory Trust Investment Benefits

Defer 100% of capital gains and depreciation recapture tax

Relief from day to day property management headaches

Upgrade to potentially institutional quality real estate

Potentially increase current income & growth potential

Diversify real estate investment holdings by asset class

Identify quality replacement property solutions during the stringent
   45-day window

Geographically diversify real estate holdings

Financing in place to meet 1031 leverage requirements

Cash flow from properties may be partially sheltered by new
   deprecition schedule

Non-stringent lender requirements

Remove or minimizes real estate holdings from taxable estate

Capital gains tax is forgiven or “stepped up” at the death of investor
      Risks:

As with any investment in real estate, there are risks associated with TIC ownership, including fluctuations in the real estate market that may impact the value of the property. The following risks may also be associated with investment: illiquidity, economic risks due to vacancy rates, default if unable to pay mortgage and possible loss of principal. TIC ownership requires unanimous approval to take major action, such as a re-finance or sale. Obtaining unanimity may be difficult when 10 or 20 investors are involved. It is not possible to address all relevant risk factors in this forum. Risk factors are outlined in the Private Placement Memorandum for each offering. Investors should thoroughly understand all risk factors and discuss them with their financial representative prior to investing in a 1031/TIC offering.


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Copyright 2006 1031alternatives.net. All rights reserved.
Securities offered through Pacific West Securities, Inc. Member FINRA/SIPC

This material is neither an offer to sell nor the solicitation to purchase any security. The information is for discussion and information purposes only. It is not intended to replace competent legal, tax or financial planning advice. The applicable tax codes apply to and relate to federal law only. Individual states may have their own additional tax codes. Please contact the appropriate tax and legal professional in your state. This information is provided from sources believed to be reliable but should be used in conjunction with professional advice that is consistent with your personal situation. Properties represented here are not current offerings and properties of this nature may not always be available for purchase.