RENT Magazine Q2 '24

When it comes to using a 1031 exchange tax deferral, it often feels like Uncle Sam holds all the cards. If you sell your property and use a 1031 exchange, you must find another property in only 45 days. That property must be of equal or greater value, and you must obtain equal or greater debt even if that debt is more expensive. DO NOT LET UNCLE SAM DICTATE WHEN AND HOW TO DEFER YOUR CAPITAL GAINS TAX

The overwhelming majority of the time, depreciation plays an important role in owning real estate, but when transacting a 1031 exchange, you may only get a partial depreciation schedule. In other words, your depreciation benefits will be reduced. But what if there was a way to regain control over your tax obligations, allowing you to make

decisions on your own terms? Enter the Deferred Sales Trust, a powerful tool based on Section 453 of the tax code that offers individuals a flexible alternative to the traditional 1031 exchange. Let’s break down how the Deferred Sales Trust works and explore its benefits compared to the constraints of a 1031 exchange.

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FLEXIBILITY IN TIMING AND REQUIREMENTS

With a 1031 exchange, sellers are bound by strict deadlines and criteria. From identifying a replacement property within 45 days to ensuring equal or greater value and debt, the process can feel restrictive. In contrast, the Deferred Sales Trust provides sellers with the freedom to sell today and defer taxes immediately, without the pressure to meet specific requirements within a tight timeframe.

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