Securitized Passive Income 1031 Programs

Three limited options for “1031’s” in disposing of appreciated real estate:

  • Sell the property and pay taxes. Upwards to 30% or more profit may be due in taxes in addition to a recapture of depreciation at a 25% rate and 3.8% Medicare Tax.
  • Sell property to exchange into another like property.
  • Sell the property and exchange into owning partial ownership of commercial properties.
  • Passive ownership
  • No management responsibilities
  • Receive potential projected monthly income
  • Current income tax benefits
  • Potential appreciation of the properties

Delaware Statuary Trust

Two Financial Suitability Requirements to Be an Accredited Investor. (to qualify for a DST)

  • Income: For single income for last two years and current year of $200,000. For married, $300,00 OR,
  • Net Worth: $1 million Net Worth exclusive of home & furnishing

STEPS in a 1031 Tax-Deferred (DST) Exchange Process

  • Meet with financial advisor to consider all your options.
  • Check with your accountant to provide a tax analysis reflecting the amount of taxes which will be due if an exchange is not elected.
  • If your property is listed make sure all aware that you have decided to do a 1031 exchange.
  • Establish an Accommodator/Qualified Intermediary to establish an account for the transfer. (see below)
  • Set up escrow to reflect the exchange
  • When escrow closes, net funds are wired to your “Qualified Intermediary” account. “If Your QI account is not set up and escrow closes and YOU receive the funds, you will pay taxes!
  • You now have 45-days to identify replacement properties and another 135 days which to close escrow.
  • Delaware Statuary Trust closing can generally be completed within an approximate two-week period or less depending on availability.
  • A diversified portfolio of property sponsors should be considered. Due to regulatory requirements, there are concentration restrictions of amount which can be allocated to a sponsor or a property.

Critical Risk Criteria

The critical risk criteria that you must review and evaluate prior to making your final decision on which 1031 Exchange Qualified Intermediary to retain includes, but is not limited to, the following areas:

  • Technical capability of the 1031 Exchange Qualified Intermediary
  • Internal processes and audit controls to safeguard your 1031 Exchange funds and assets
  • Use of Qualified Trust Accounts or Qualified Escrow Accounts
  • Decision criteria and guidelines for investment of your 1031 Exchange funds
  • Protection from potential errors or omissions by the Qualified Intermediary
  • Protection from potential theft or embezzlement of 1031 Exchange funds

An experienced and professional 1031 Exchange Qualified Intermediary will understand these concerns and should be happy to discuss these crucial issues with you. And, well managed institutional 1031 Exchange Qualified Intermediaries like Exeter 1031 Exchange Services, LLC will have already evaluated the applicable risks, addressed the critical issues and implemented appropriate safeguards to protect your 1031 Exchange funds to ensure the successful completion of your 1031 Exchange transaction.

The following comments will provide specific and acceptable industry guidelines and standards that will be helpful in evaluating 1031 Exchange Qualified Intermediaries and in determining if acceptable and adequate controls and safeguards are being practiced. You should never take short-cuts when evaluating and selecting a 1031 Exchange Qualified Intermediary for your 1031 Exchange transaction; to do so could have disastrous consequences.

An experienced and professional 1031 Exchange Qualified Intermediary will understand these concerns and should be happy to discuss these crucial issues with you. And, well managed institutional 1031 Exchange Qualified Intermediaries like Exeter 1031 Exchange Services, LLC will have already evaluated the applicable risks, addressed the critical issues and implemented appropriate safeguards to protect your 1031 Exchange funds to ensure the successful completion of your 1031 Exchange transaction.

The following comments will provide specific and acceptable industry guidelines and standards that will be helpful in evaluating 1031 Exchange Qualified Intermediaries and in determining if acceptable and adequate controls and safeguards are being practiced. You should never take short-cuts when evaluating and selecting a 1031 Exchange Qualified Intermediary for your 1031 Exchange transaction; to do so could have disastrous consequences.

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