What is the difference between a REIT and a DST?
What is the difference between a REIT and a DST?
In a REIT you are issued dividends based on the shares that are owned. You as the investor are responsible for the taxes on these dividends. In a DST you receive passive monthly income at a yield of 4.5%-6.5%. The tax treatment on the DST is taxed at ordinary income.
Can you do a 1031 into a REIT?
An investor is not able to do a direct 1031 exchange into a REIT since REIT shares are not considered “like kind” property by the IRS for the purposes of a 1031 exchange.
What is a real estate DST?
A DST stands for Delaware Statutory Trust and is an entity that is used to hold title to investment real estate. The typical loan to value of a DST 1031 property is 50% however, some DST properties are offered all cash/no debt in order to eliminate all financing risks.
How do I report DST income?
Tax reporting for a DST is done on a Schedule E utilizing property operating information provided by the Sponsor. The IRS issued the Revenue Ruling 2004-86 that set forth parameters a DST must meet in order to be viewed as a grantor trust and qualify for a viable tax deferring vehicle.
How do I create a DST?
A DST is formed by filing a certificate of trust with the Office of the Secretary of State of the State of Delaware. This certificate states only the name of the trust and the name and address of the Delaware trustee.
Are DST investments safe?
There is always risks when it comes to investing, but we do our due diligence as well our broker dealer to ensure the DST is a good investment for our clients, as well the DST is a safe investment for our clients.
What are the key benefits of a statutory trust?
For many 1031 exchange investors, Delaware Statutory Trusts can be an appealing alternative to acquiring a property on their own. It offers a combination of investment efficiency, quality properties, flexible options, makes meeting IRS-imposed timeframes simpler and alleviates on-going landlord duties.
How do I avoid taxes on a 1031 exchange?
There are a few simple rules of thumb to follow to avoid boot in a 1031 tax-deferred exchange:
- Trade up in real estate value with one or more replacement properties.
- Reinvest all of your 1031 exchange proceeds from the relinquished property into the replacement property.
What’s another name for a reverse 1031 exchange?
Reverse exchanges apply only to Section 1031 property, so it is also referred to as a 1031 exchange.
When can you not do a 1031 exchange?
The two most common situations we encounter which are ineligible for exchange are the sale of a primary residence and “flippers”. Both are excluded for the same reason: In order to be eligible for a 1031 exchange, the relinquished property must have been held for productive in a trade or business or for investment.
How much does it cost for a 1031 exchange?
The short answer. The direct cost to you in a 1031 exchange typically comes in the form of a fee paid to your QI. QI fees vary, but most reports indicate that a typical deferred 1031 exchange costs between $600 and $1,200.
Can I do a 1031 exchange after closing?
Can you do a 1031 exchange after closing? The use of rescission has long been recognized in law generally in connection with transactions not related to 1031 exchanges. However, the Internal Revenue Service (“IRS”) has allowed the use of rescission to correct a problem with an exchange transaction.
How long must you hold 1031 property?
five years
How long do you have to live in your rental to avoid capital gains?
Living in your rental full-time for at least two years prior to selling can help you take advantage of the gain exclusion of $500,000 ($250,000 if single), which can wipe out all or most of your gain on the property.
