The professionals at Concorde are CPAs, tax professionals, and licensed Investment Securities Representatives specializing in 1031 exchanges. Using our tax background, investment experience and real estate expertise, we work with clients to assure they’re investing in replacement real estate that best suits their needs, and continues the pride and benefits of ownership.
A 1031 Exchange is a transaction in which a taxpayer can sell one property and buy another without a tax consequence. This is generally done to avoid paying capital gains tax on the sale of appreciated property and/or property that has been substantially depreciated for tax purposes over a number of years, and therefore has a very low tax basis.
IRS Code Section 1031 allows a taxpayer to take up to 100% of the proceeds from the sale of property and purchase ownership in new property, while deferring the tax on the sale of the property.
Contingent on the type of property you sell, you may incur 6 different levels of taxes:
Seller arranges for the sale of property and includes exchange language in the sale contract
At closing, sale proceeds are deposited with a Qualified Intermediary (QI) or escrow agent
Seller identifies potential replacement property within 45 days
Seller completes purchase of replacement property within 180 days by directing QI to release funds for closing
Section 1031 Exchanges have been part of the tax code since 1921. In 1995, the IRS began allowing for replacement properties to have multiple owners. This meant that taxpayers no longer had to find, buy, and manage property on their own. The IRS rules state that you can exchange into a partial interest of professionally managed real estate. Today that is usually accomplished through a Delaware Statutory Trust (DST).
A Delaware Statutory Trust (DST) is a legal entity created under the laws of the State of Delaware. A DST is a trust that acquires real estate to be used as 1031 replacement property. Each taxpayer who exchanges into the DST becomes a "beneficial owner" of the Trust. Each owner's beneficial interest is based on the amount they exchange/contribute to the Trust. All income, expenses, appreciation, debt reduction, etc. is shared based on the owner's percent of interest in the Trust.
Today there are several national managers (Sponsors) of property that create DSTs for use in a 1031 Exchange. These firms professionally manage billions of dollars of real estate. Investors in a DST are utilizing their expertise in: management, tenant relationships, acquisitions, dispositions, leasing, financing, geographic knowledge and industry research. Concorde works with you in selecting the most appropriate firm and properties to use for your 1031 exchange.
If the responsibility of property management and maintenance is something you’d like to reduce, or even avoid, a 1031 Exchange, where suitable, can provide many viable options. Most DSTs offer a broad range of high-quality, professionally managed properties that may save you time, lessen complexity and increase peace of mind.
The professionals at Concorde are CPAs, tax professionals, and licensed Investment Securities Representatives specializing in 1031 exchanges. Using our tax background, investment experience, and real estate expertise, we scrutinize each DST program and sponsor. Clients can expect us to present only the properties that, based on our experience and review, meet our sophisticated, discerning and selective standards. We analyze and research each program, compare all the variables, and assist investors in making an informed decision on their replacement property.
Concorde will work with you, answering questions, doing analysis, and presenting "what if" scenarios to assure you are investing in the replacement real estate that best suits your needs, maintaining your pride – and benefits – of ownership.
Since 1995, our levels of understanding, review procedures, and property comparisons have been unique in the industry, making us an experienced and trusted source for answers to your 1031 questions.
There is great flexibility here. You can exchange 100% into one property or DST, you can split it up over multiple DSTs, you can use the DST alongside purchasing a property on your own, and you can exchange only a portion of your proceeds while paying taxes on the amount you keep. Using our accounting background, we can assist in calculating the various options available.
There are a variety of methods for identification. The most common are to either list three (3) potential replacement properties, or list 200% of your proceeds spread over multiple properties. Concorde will work with you in determining the best method to use.
Most DST programs today have a goal of holding the property 7-10 years. Part of the professional management you are investing into includes the constant monitoring of the market, and being mindful of the right time to sell. It is not unusual for a sponsor to initiate a sale any time within that 10-year period. When that occurs, investors have plenty of notice; then have all the options they have today. They can complete another 1031 exchange, keep the proceeds and pay the tax, or execute a partial exchange.
Like any real estate, this is not a liquid investment. It is meant to be long-term, similar to the property you are selling. That said, you do have the right to sell your DST beneficial interest before the property is sold by the Sponsoring Firm.
Sponsoring firms seek to provide investors with a monthly distribution based on their share of the income. In addition, as professional managers, the sponsors will provide regular updates as to the status and operations of the property in the form of written reports and conference calls.
The cost of the DST organization is built into the program. There is no out-of-pocket fee to the investor. The only out-of-pocket cost incurred by the investor is the cost of the QI. Concorde is paid by the Sponsor and never charges the investor an additional fee.
Concorde has long-standing relationships with local and national QI firms. We can assist in referring you to a firm that may best fit your needs.
Concorde has been involved in 1031 Exchanges for over 20 years. We have facilitated hundreds of exchanges with all the major sponsors, and remain in regular contact with the Sponsoring Firms. Concorde stays with you during the entire period of your ownership, assisting with, and monitoring, all our client’s activities and properties.
DSTs are passive real estate investments. They are reported in the same manner as any rental property would be reported for an individual or entity. You will be provided detailed information from the Sponsor to be used when completing your tax return. Using our tax background, Concorde can assist you and/or your CPA in the reporting process.
Tax reporting is simplified and does not produce a K-1.
The information herein has been prepared for educational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. Such offers are only made through the sponsors Private Placement Memorandum (PPM) which is solely available to accredited investors and accredited entities. There are risks associated with investing in real estate and Delaware Statutory Trust (DST) properties including, but not limited to, loss of entire investment principal, declining market values, tenant vacancies and illiquidity. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Diversification does not guarantee profits or guarantee protection against losses. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation.
Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory Services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Concorde Financial Group is independent of CIS and CAM.