Cynthia owns a small manufacturing company.  She bought the building she occupies fifteen years ago for $600,000 with an SBA loan.  Wishing to retire, she sold the company along with the building.  The building was valued at $2,000,000.  There was $200,000 in remaining debt on the building.

Results without using a 1031 exchange and DST structure:

She received enough cash from the sale of the business to meet liquidity needs. However, this cash along with the proceeds from the sale of the building left her with a $680,000 tax liability on just the building.  Cynthia did not want to apply for and guarantee a new loan to defer the taxes on the $200,000 she paid off with the proceeds.

Results using a 1031 exchange and DST structure:

Because Cynthia had done so well with the investment in her building, she was comfortable investing the entire proceeds from the sale of the building back into a diversified portfolio of institutional quality real estate.

By investing the entire $2,000,000 proceeds from the sale of the building back into real estate Cynthia saved $600,000 in taxes and acquired five DST’s that owned a diversified portfolio of apartments, medical offices, and single tenant properties throughout the United States with a projected cash-on-cash return of 6%.

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