Can a 1031 exchange go into a REIT?

An investor is not able to do a direct 1031 exchange into a REIT since REIT shares are not considered “like kind” property by the IRS for the purposes of a 1031 exchange.

Can you exchange into a REIT?

Again, you can do a 1031 exchange into a REIT, though the path between your property and REIT ownership is somewhat involved. However, this option provides some great benefits, including deferred capital gains taxes, but also some drawbacks. First, let’s explain the nature of real property, 1031 exchanges, and REITs.

Can I 1031 exchange into a syndication?

Exchanging into a larger and more valuable property via a syndication often provides a better return on investment with more cash flow and additional depreciation benefits. Most syndicators will tell you that transitioning from a 1031 into a syndication is simply IMPOSSIBLE.

CAN 1031 exchange be used for primary residence?

A 1031 exchange generally only involves investment properties. Your primary residence isn’t typically eligible for a 1031 exchange. Even a second home that you live in some of the time is ineligible if you don’t treat it as an investment property for tax purposes.

Can a REIT sell a property?

But there are some risks, especially with non-exchange traded REITs. Because they do not trade on a stock exchange, non-traded REITs involve special risks: Lack of Liquidity: Non-traded REITs are illiquid investments. They generally cannot be sold readily on the open market.

What is the difference between a REIT and a DST?

In a REIT you are issued dividends based on the shares that are owned. You as the investor are responsible for the taxes on these dividends. In a DST you receive passive monthly income at a yield of 4.5%-6.5%. The tax treatment on the DST is taxed at ordinary income.

What are DST properties?

A DST is an investment trust which holds one or more pieces of real property in which investors can purchase ownership interest in, thereby allowing investors to have a fractional ownership interest in the property held by that trust.

What makes a REIT eligible for 1031 exchange?

Investors buy shares in the REIT, rather than the entire property, and their cash returns come from dividends, rather than rental income. As such, a REIT is defined as a security, rather than real property. To qualify for tax-deferred exchange treatment under Section 1031, you can’t directly exchange out of your property into a security.

When do I need to do a 1031 exchange?

When doing a 1031 exchange, the owner must identify the property he is exchanging and declare it before the sale. Once the subject property is sold, the investor has 45 days to identify a new property to exchange with the old property.

Can a security be exchanged into a REIT?

As such, a REIT is defined as a security, rather than real property. To qualify for tax-deferred exchange treatment under Section 1031, you can’t directly exchange out of your property into a security.

What’s the difference between real property and 1031 exchange?

If we find the asset being relinquished does qualify for a 1031 Exchange, the next question is what the replacement property will be. As discussed previously, section 1031 applies to both “real property” and “personal property.” The primary difference between a personal property exchange and a real property exchange is the definition of like-kind.