ESTATE PLANNING USING 1031 EXCHANGES AND DELAWARE STATUTORY TRUSTS

Deferring Taxes Through a 1031 Exchange: 

Section 1031 of the U.S. Tax Code allows investment property owners to defer capital gains taxes and depreciation recapture by exchanging their relinquished property for “like-kind” replacement property. 

Step-Up in Basis Upon Death:

Under current U.S. tax laws, depending on the structure of ownership, when a property owner dies, the property's cost basis is stepped up to the fair market value on the date of death. Therefore, if your heirs were to sell the property right away, they would owe little to no capital gains taxes since the sales price would likely be close to the current fair market value. 

Estate Planning with DSTs:

However, engaging in a 1031 Exchange with a Delaware Statutory Trust (DST) as your replacement property can solve this problem. A DST is a legal entity created under the laws of Delaware. The DSTs holds one or more income-producing commercial properties and meets 1031 Exchange requirements for like-kind replacement property.

This document is designed for general information only. The information presented on this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship. 

For more information on this and other topics, please contact Kevin via any of the channels listed below: 📧kevin@kmckernan.com or 📞718-317-5007