Revolution Xchange was founded with a single mission: to provide a range of quality properties for investors seeking a 1031 exchange through a Delaware Statutory Trust (DST). The 45-day Identification Period can be a very stressful event for 1031 Exchange investors. Revolution Xchange can ease the stress with a closely vetted DST turnkey solutions. Our experienced team of securities and real estate professionals have created user friendly systems that can accomplish this for you within days. The headaches of dealing with the tenants, the toilets and the trash are over! You can now purchase a beneficial interest in a variety of properties across different asset classes using Delaware Statutory Trusts (DSTs). Not only does this allow you to diversify your investment dollars, but it also grants you access to larger and higher quality pieces of commercial real estate than ever before. We are here to make this a seamless transaction.

A tax-deferred exchange represents a simple, strategic method for selling one qualifying property and the subsequent acquisition of another qualifying property within a specific time frame. Although the logistics of selling one property and buying another are virtually identical to any standard sale and purchase scenario, an exchange is different because the entire transaction is memorialized as an exchange and not a sale. And it is this distinction between exchanging and not simply selling and buying, which ultimately allows the taxpayer to qualify for deferred gain treatment. So essentially, sales are taxable and exchanges are not. Internal Revenue Code, Section 1031.

A property owner or investor who expects to acquire replacement property subsequent to the sale of his existing property should consider an exchange. To do otherwise would necessitate the payment of capital gain taxes in amounts which can exceed 20%-30%, depending on the appropriate combined federal and state tax rates. In other words, when purchasing replacement property without the benefit of an exchange, your buying power is dramatically reduced and represents only 70%-80% of what it did previously.

No, although there was a time when all exchanges had to be closed on a simultaneous basis, they are rarely completed in this format any longer. In fact, a significant majority of exchanges are now closed as delayed or deferred exchanges.

Although the definition of like-kind has often been misinterpreted to mean that the property being acquired must be utilized in the same form as was the property being exchanged. In other words, apartments for apartments, hotels for hotels, farm for farm, etc. However, the true definition is again reflective more of intent than use. Accordingly, there are currently two types of property, which qualify as like-kind:

1. Property held for investment, and, or
2. Property held for a productive use in a trade or business.

A Replacement Property is considered identified before the end of the 1031 Exchange 45-day identification period only if the following requirements are satisfied. However, any Replacement Property you receive before the end of the identification period will in all events be treated as identified before the end of the identification period. A Replacement Property is identified only if it is designated as Replacement Property in a written document signed by you. This document must be sent before the end of the identification period to a person (other than yourself or a related party) involved in the exchange.

While a like-kind exchange does not have to be a simultaneous swap of properties, you must meet two-time limits or the entire gain will be taxable. These limits cannot be extended for any circumstance or hardship except in the case of presidentially declared disasters.

• The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties. The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary. However, notice to your attorney, real estate agent, and accountant or similar persons acting as your agent is not sufficient.
• Replacement properties must be clearly described in the written identification. In the case of real estate, this means a legal description, street address or distinguishable name. Follow the IRS guidelines for the maximum number and value of properties that can be identified.
• The second limit is that the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier. The replacement property received must be substantially the same as property identified within the 45-day limit described above.

You’ve probably noticed that Opportunity Zones have become popular among both institutional and individual investors recently. Both options allow investors to defer capital gains taxes, but they have some key differences. The main difference between the Opportunity Zone vs. the DST is the type of real estate investments that qualify. A Qualified Opportunity Fund involves investing in an IRS-identified Opportunity Zone, an economically disadvantaged or distressed area. DSTs for 1031 exchanges do not have location-specific requirements but do have criteria for the replacement properties to qualify as eligible.

Many of the key similarities and differences between these two investment options involve IRS regulations, eligible capital gains and deferment guidelines. Your decision on which option to pursue depends on your individual financial goals and requirements.

QOFs offer unique features that distinguish them from DST investments. Organized as corporations, Real Estate Investment Trusts (REITs) or partnerships, QOFs exist solely as a vehicle for Opportunity Zone investments. Individual investors, trusts, partnerships and estates can directly invest in the fund. To meet IRS requirements, a QOF must have 90% of its investments in an Opportunity Zone — if it adheres to the regulations, the fund can make investments on multiple qualified tracts.

Opportunity Zone investments offer several advantages to consider. The key ways that QOFs can potentially benefit investors include:

• Sizable tax advantage: For those who invest in Opportunity Zones, they will be eligible for a 10% step-up in basis after holding the investment for over 5 years and a 15% step-up in basis after 7 years.
• Benefits communities: This option delivers invaluable resources to economically struggling communities that need it most, contributing to the area’s growth.
• Broad investment criteria: You can defer taxes on capital gains from several assets along with real estate, including business sales, stocks, cryptocurrency, REITs and bonds.

To many real estate investors, the buzz words often used to describe different aspects of a tax deferred exchange can be confusing. For example, doesn’t something with two ‘downlegs’ and three ‘uplegs’ sound a lot more like a lopsided creature than an exchange transaction? Reflected below are brief descriptions of commonly used exchange terminology.

Actual Receipt: Physical possession of proceeds.

Boot: “Non like-kind” property received; “Boot” is taxable to the extent there is a capital gain.

Cash Boot: Any proceeds actually or constructively received by the Exchanger.

Constructive Receipt: Although an investor does not have actual possession of the proceeds, they are legally entitled to the proceeds in some manner such as having the money held by an entity considered as their agent or by someone having a fiduciary relationship with them. This creates a taxable event.

Direct Deeding: Transfer of title directly from the Exchanger to Buyer and from the Seller to Exchanger after all necessary exchange documents have been executed.

Exchanger: Entity or taxpayer performing an exchange.

Exchange Agreement: The written agreement defining the transfer of the relinquished property, the subsequent receipt of the replacement property, and the restrictions on the exchange proceeds during the exchange period.

Exchange Period: The period of time in which replacement property must be received by the Exchanger; Ends on the earlier of 180 calendar days after the relinquished property closing or the due date for the Exchanger’s tax return (If the 180th day falls after the due date of the Exchanger’s tax return, an extension may be filed to receive the full 180-day exchange period.)

Identification Period: A maximum of 45 calendar days from the relinquished property closing to properly identify potential replacement property(s).

Like-kind Property: Any property used for productive use in trade or business or held for investment; Both the relinquished and replacement properties must be considered “like-kind” to qualify for tax deferral.

Mortgage Boot: This occurs when the Exchanger does not acquire debt that is equal to or greater than the debt that was paid off on the relinquished property sale; Referred to as “debt relief”. This creates a taxable event.

Qualified Intermediary: The entity who facilitates the exchange; Defined as follows: (1) Not a related party (i.e., agent, attorney, broker, etc.) (2) Receives a fee (3) Receives the relinquished property from the Exchanger and sells to the buyer (4) Purchases the replacement property from the seller and transfers it to the Exchanger; Asset Preservation, Inc. (API) is a “Qualified Intermediary.”

Relinquished Property: Property given up by the Exchanger; Also referred to as the sale, exchange, ‘downleg’ or ‘Phase I’ property.

Replacement Property: Property received by the Exchanger: Also referred to as the purchase, target, ‘upleg’ or ‘Phase II’ property.

The 200% Rule allows you to identify unlimited replacement properties as long as their cumulative value doesn’t exceed 200% of the value of the property sold.