1031 Exchange Alternative #1 — Utilizing a 1031 exchange into DST 1031 properties:
Delaware Statutory Trust (DST) real estate has been a great way for investors to participate in passive, professionally managed real estate for their 1031 exchanges since the IRS enacted Revenue Ruling 2004-86 which effectively blessed the use of a properly structured DST 1031 investment as “like kind” for the purposes of a 1031 exchange. The DST investment structure of real estate ownership has given investors the potential to diversify across several property sectors, geographic locations and with various managers. For those that wish to focus on areas of life like family, hobbies and travel instead of dealing with tenants or just having to be constantly concerned with the value of hands-on real estate and the best time to sell, DSTs can potentially be the right thing at the right time.
1031 Exchange Alternative #2 — Utilizing a Qualified Opportunity Zone Fund in lieu of a 1031 Exchange: Qualified Opportunity Zone Funds are relatively recent investment vehicles whereby investors can place capital gains (within a certain timeline of selling) into real estate investments. Through the Tax Cuts and Jobs Act, certain areas that have been mandated as Opportunity Zones according to the IRS as “an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.” It should be noted though, that Opportunity Zones are not necessarily used as a 1031 exchange, but rather another option in the case of a failed 1031 exchange or a potential tax-deferral tool for other investments with gains such as stock or the sale of a business.
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