• Skip to primary navigation
  • Skip to main content
(866) 867-8633
  • Partner Login
  • Request a Consultation
Reef Point LLC Logo

Reef Point, LLC

Deferring Recoginition of Capital Gains

  • DST Explained
    • Exit Strategy
    • 1031 Exchange Alternative
    • 1031 Exchange Rescue
    • Guidelines for a DST to Qualify
    • Standard DST & DST Plus
  • Meet the Team
    • Meet Greg Reese
  • Resources
    • Blog
    • FAQ
    • Case Studies
    • Videos
    • Webinars
  • Partner Center
    • Attorneys
    • Business Brokers
    • CPAs
    • Financial & Investment Advisors
    • Mergers and Acquisitions Professionals
    • Real Estate Professionals
    • Partner Portal
  • Contact Us
  • Partner Login
  • Request a Consultation OLD
  • Show Search
Hide Search

How a DST Can Rescue You from a Failed 1031 Exchange

Reef Point LLC · February 3, 2021 ·

How a DST Can Rescue You from a Failed 1031 Exchange | Reef Point LLC

As an astute investor, you know that long-term capital gains taxes can quickly eat away at the profits you make on your investments. Consequently, avoiding or at least deferring payment of these taxes for as long as possible is likely one of your main objectives.

For real estate investments, this usually means doing a 1031 exchange whereby you exchange your substantially appreciated real estate for other “like property,” placing your sale proceeds with a qualified intermediary (QI), also called an accommodator, who holds them until the exchange completes.

Failed 1031 Exchanges

One of the biggest downsides to 1031 exchanges, however, is that they don’t always complete. In fact, they often fail. Why? Because 1031s have many moving parts. Not only must you find “like property” to invest in, but you must also designate this replacement property within 45 days of your sale and close on the replacement property within 180 days. If you miss either deadline, the 1031 fails, your sale proceeds revert to you, and you are immediately liable for payment of the capital gains tax on your sale.

DST Rescue

If you find yourself facing a potentially failed 1031 exchange, you likely are in a state bordering on panic. But what if you could rescue yourself and avoid immediate payment of your capital gains taxes? You can. The mechanism is called a Deferred Sales Trust. This legal, tested, and innovative option allows you to engage with Reef Point’s Estate Planning Team and its tax attorneys, who will create a DST specifically structured to accommodate your needs as well as your overall investment goals.

You then transfer your funds from your qualified intermediary held funds into your new DST. In other words, the sale proceeds from your failed 1031 revert to the DST, not to you. You thus have no constructive receipt of them and consequently have no capital gains tax liability. Nor do you have any liability for depreciation recapture.

The DST option also works as a rescue for a failed 721 exchange.

Additional Advantages

Your DST doesn’t just rescue you from a failed 1031 or 721 exchange, however. It gives you far greater investment flexibility because it allows you to acquire assets or financial instruments disallowed by 1031s and 721s. Nor does a DST involve strict time frames in which you must make and implement your investment decisions.

Finally, a DST does not limit you to “like kind” property. In fact, it doesn’t limit you at all regarding what types of “prudent investments” your DST Trustee can make on your behalf. For instance, you can instruct your Trustee to invest in any of the following:

  • Stocks
  • Bonds
  • Mutual funds
  • Securities
  • Annuities
  • Real Estate Investment Trusts (REITs)
  • Start or acquire a business

This extraordinary investment flexibility makes a DST an extremely useful tool, especially if you want to diversify your investment portfolio as part of your retirement planning strategy.

Want to Know More?

Interested in finding out more about how a DST can rescue you from a failed 1031 exchange while offering you far greater investment flexibility? Contact Reef Point today. We’ll be happy to give you a free DST analysis and answer all your questions.

Deferred Sales Trust 1031 Exchange, Deferred Sales Trust, DST, Failed 1031 Exchange

Welcome

Reef Point LLC was founded by Gregory H. Reese who is one of only 13 Trustees in the US for Deferred Sales Trusts.

Quick Links

  • DST Explained
  • Partner Center
  • Case Studies
  • FAQ
  • Contact Us

Subscribe

Receive invitations to exclusive events, seminars occasional market news, updates, and opportunities from the Reef Point team.

  • This field is for validation purposes and should be left unchanged.

Contact

3525 Hyland Ave., Suite 145
Costa Mesa, CA 92626
714-581-5376
info@reefpointusa.com

  • Facebook
  • LinkedIn

As an authorized and approved Trustee for the Deferred Sales Trust and Member of the Estate Planning Team (EPT), Reef Point, LLC promotes the use of the Deferred Sales Trust™ or other estate planning techniques and is not responsible for recommendations made by other members of the Estate Planning Team, including the Deferred Sales Trust or other tax, legal or estate planning strategies.

© Copyright 2021 | Reef Point, LLC All Rights Reserved | Privacy Policy | Terms & Conditions

© 2023 Reef Point, LLC