Creative Solutions For Capital Gains

Creative Solutions For Capital Gains

There are several reasons why property investors are looking for creative solutions for their money. Our team of financial experts at Sutter Wealth Management, located in Roseville, California, want to use this page to explain when a 1031 exchange and a Delaware statutory trust could benefit you and your money. If after reading this article you find yourself thinking that this creative investment solution might be the right move for you, call our office or reach out to us online.

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What is a 1031 exchange?

A 1031 exchange impacts rental properties or other properties used as investments. Essentially, a 1031 exchange allows owners to buy and sell similar properties while deferring the capital gains taxes. 

But for this creative solution to work, the property must be transferred to an intermediary and not the seller of the property. An intermediary is a person or organization who agrees to be the facilitator of the sale. Essentially, the intermediary holds the funds until they can be transferred to the new property.

What is a Delaware Statutory Trust?

A Delaware Statutory Trust (DST) is a legal entity created by Delaware laws used to house income from commercial properties. The types of properties that can fall under DSTs include:

  • Apartments 
  • Retail spaces
  • Commercial properties
  • Offices
  • Industrial parks

This is only a short list of scenarios where a DST could apply. 

A Delaware Statutory Trust can be applied to a single property or it can host several properties at once. 

Example of a creative solution using these strategies

You might be asking yourself if you are a candidate for a creative solution using a 1031/DST. Here is a classic example of the solution in action. This example is also explained in the attached video, so take a moment to watch it as well. 

Perhaps you bought a rental property for $250,000 15 years ago, and it is now worth $1,000,000. That makes your capital gain exposure $750,000. Clearly, any property investor doesn’t want to pay upwards of $300,000 in taxes on the property. 

Instead of having to pay the capital gains taxes, you can take all of the $1,000,000 of the sale and defer the taxes by putting it into a 1031 qualifying trust or DST. This type of transaction qualifies as a 1031 exchange because the trust actually owns the physical property.

Want to learn more about creative solutions using 1031s and DSTs?

Are you in a situation with your investment property that you believe can benefit from a creative solution using a 1031 and Delaware Statutory Trust? If so, contact our expert team at Sutter Wealth Management for a no-obligation consultation today. You can also reach out online to learn more.

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