One of the reasons to buy a multifamily property is for the depreciation opportunities. But when transacting a 1031, you are limiting those income sheltering opportunities. However, that’s not the case with the Deferred Sales Trust. When buying another property using a deferred Sales Trust, you get another full depreciation schedule. Since you get a new depreciation schedule every time you buy another property, you can use cost segregation to shelter more income on every property. By using cost segregation and the Deferred Sales Trust, the new Dynamic Duo, you can potentially create more real estate wealth than when using a 1031 exchange. What if you need liquidity in the future? Say three years in the future, there is a medical emergency, and you need $100K. A 1031 exchange will not give you the liquidity you need, but you can get that amount of money out of the trust. Perhaps you have another investment, and you are taking a capital loss on that investment. You can take an equal amount of capital gains out of the trust tax free to offset the capital loss.
WHEN BUYING ANOTHER PROPERTY USING A DEFERRED SALES TRUST, YOU GET ANOTHER FULL DEPRECIATION SCHEDULE.
CONCLUSION It’s always to the seller’s benefit to be able to make decisions in real time based on different current economic situations. In a 1031 exchange, you must make all your decisions at the beginning of the process, but you can make decisions at the right time when using the Deferred Sales Trust. These are just a few examples that the Deferred Sales Trust can bring to your situation. To find out if a Deferred Sales Trust is right for you, call (713) 702-6401 for a complimentary consultation.
DAVID FISHER Founder and Tax Strategist Creative Real Estate Strategies (713) 702-6401 david@cresknowsrealestate.com
David studied accounting at the University of Texas and has been in the financial services profession since 1977. In 2010, David formed Creative Real Estate Strategies. Using his extensive background in insurance, investments, estate planning, taxes and charitable giving, David has been able to create numerous strategies that have helped his clients buy and sell millions of dollars of real estate in a more beneficial way than they might have otherwise done.
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