FYI 2014 Winter

Delaware Statutory Trusts Have Become the Structure of Choice for Fractionalized Section 1031 Exchange Programs in an Expanding Real Estate Marketplace

By Louis Rogers, CEO, Capital Square Realty Advisors, LLC

February 1, 2014

Section 1031 exchange programs, which raised over $3.5 billion of equity at the peak in 2006, and then nearly disappeared during the recession, are back in a big way. The Delaware Statutory Trust (DST) has taken the place of Tenants in Common (TIC) as the structure of choice for fractionalized Section 1031 exchange programs.

Equity raised for DST programs has increased dramatically coming out of the recession as investors have sought to defer federal and state income taxes through qualifying Section 1031 exchanges. The primary goal is the same as before the recession– tax deferral— but the vehicle has changed to a DST from a TIC structure.
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