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Sale of Income Property - Case Study


During our first meeting, Ray & Rhonda told me that they had sold their commercial property and were expecting to pay thousands of dollars of capital gains tax and depreciation recapture. Their CPA didn’t have any ideas that would defer their taxes. Normally, a Section 1031 exchange could be used to defer all taxes on the sale of income property, but the new property has to be identified within 45 days. Ray & Rhonda were on day 43 when I learned of their situation.

The Problem

Ray and Rhonda were running out of time to find a way to defer thousands of dollars of capital gains taxes and depreciation recapture on a commercial property that they had sold. Their CPA was unable to suggest any remedy.

The Challenge

The best solution for Ray and Rhonda would be to use a Section 1031 exchange to defer all taxes on the sale of an income property. However, the new property must be identified within 45 days of the sale, and they were already on day 43 when we first met.

The Goal

Ray and Rhonda were planning on transitioning out of the daily active management of their commercial and rental properties. They like the revenue stream but not the active management. They also want to defer capital gains taxes for as long as possible. Using a DST for the 1031 exchange achieves all of their goals. 

The Path

We work closely with a number of companies that carry a ready inventory of exchange properties, so we were able to identify a suitable property the day after our initial meeting. As a result, Ray and Rhonda were able to use a Section 1031 exchange in a Delaware Statutory Trust to defer all taxes.

The Frontier Wealth Strategies Benefit

Because of our well-developed networking capabilities, we found a swift and appropriate Section 1031 tax solution for Ray and Rhonda, enabling them to enjoy the best possible income from the sale of their property.