Modernizing the §1031 Exchange Using Delaware Statutory Trusts to Better Serve Clients - VIRTUAL

Overview

This course provides a practical, advisor-focused review of how Delaware Statutory Trusts may be used as qualifying replacement property in a properly structured §1031 exchange. The course explains how DSTs function within the exchange framework, why they are increasingly relevant to aging landlords, business owners, and investors seeking relief from active property management, and how they may create planning opportunities for tax deferral, diversification, and estate strategy.

Participants will gain a working understanding of the mechanics of the §1031 exchange, the role of the qualified intermediary, IRS acceptance of DST interests as like-kind replacement property, and the principal advantages and drawbacks of the DST structure. The program also addresses practical planning issues, including investor suitability, illiquidity, sponsor dependence, accredited investor considerations, and the importance of evaluating exit options.

Highlights

• Core requirements of a valid §1031 exchange and the importance of engaging a qualified intermediary before closing on the relinquished property
• How DSTs are structured and why beneficial interests in properly structured DSTs may qualify as replacement property for §1031 purposes
• The IRS-imposed structural limitations on DSTs, sometimes described as the “Seven Deadly Sins”
• How DSTs can help clients move from active real estate management to a more passive ownership model
• Tax planning considerations, including potential deferral of capital gains tax, depreciation recapture tax, and net investment income tax
• Key strategic advantages, including access to institutional-quality real estate, diversification, non-recourse debt, simplified tax reporting, closing efficiency, and estate planning flexibility
• Key disadvantages and risks, including illiquidity, lack of investor control, fees, sponsor dependence, structural inflexibility, real estate risk, and accredited investor requirements
• Planning issues involving liquidity events, return-to-active-management options, §1033 applications, and the §721 UPREIT “one-way election” concern

Prerequisites

None.

Designed For

CPAs in tax, estate, real estate, business advisory, financial planning, and family wealth planning practices; practitioners advising clients with appreciated investment real estate; and CPAs serving business owners, retirees, family farm owners, and clients evaluating tax-efficient exit strategies from actively managed real property.

Objectives

• Identify the core requirements of a valid §1031 exchange and the role of the qualified intermediary
• Explain how a Delaware Statutory Trust may qualify as replacement property in a §1031 exchange
• Recognize the principal tax and planning issues affecting clients selling appreciated real estate
• Evaluate the principal advantages and disadvantages of DSTs for clients seeking tax deferral, passive ownership, diversification, or estate planning flexibility
• Spot suitability concerns and structural limitations that may affect whether a DST-based exchange is appropriate for a particular client
• Better collaborate with attorneys, qualified intermediaries, and financial professionals when clients are considering DST-based exchange strategies

Preparation

None