AEI Capital Corporation

Why consider a 1031 property exchange?

Section 1031 of the IRS Code allows an investor who is selling business or investment real estate to complete an exchange by purchasing other like-kind property. This allows deferred of up to 100% of the taxes otherwise due on the sale.

The IRS defines like-kind as any real property held for business or investment purposes. This includes, and is not limited to, raw land, farmland, rental and commercial properties. Like-kind property does not include a primary residence. IRS Section 1031 does not apply to the exchange of stocks or bonds.

Benefits of a 1031 exchange

  • Tax deferral
  • Wealth preservation
  • Income stability
  • Efficient estate planning

Tax on the sale of real estate

Gains on the sale of property are typically taxable at both federal and state levels. The following taxes may be deferred utilizing a 1031 exchange:

These are general taxes and guidelines related to 1031 exchanges. Prospective investors should consult with their tax advisors before beginning an exchange.

Completing a 1031 exchange - 4 step process

1: Engage a Qualified Intermediary to facilitate the property sale.

2: Sell the existing property. Cash proceeds are escrowed with a Qualified Intermediary.

3: Identify one or more replacement properties within 45 days after the sale of the original property.

4: Purchase a replacement property to complete the 1031 exchange within 180 days after the sale of the original property.

Exchange timeline

There is no guarantee that an investor can complete an exchange within the 45 and 180 day time frame or that the acquisition of interests will qualify under section 1031 of the Internal Revenue Code.

What is a DST 1031 exchange

A Delaware Statutory Trust (DST) allows an investor to purchase a fractional interest in a high-quality property or portfolio of properties. The DST holds title to the property while multiple investors own a beneficial interest in the DST.

For tax purposes, each DST investor is treated as owning an undivided fractional interest in real estate. IRS Revenue Ruling 2004-86 provides guidance on the use of a DST for property ownership.

An AEI DST is professionally managed and typically contains multiple debt-free, income-producing commercial properties. The DST investors receive their prorated share of the income, tax benefits and any capital appreciation produced by the real estate without the management responsibilities associated with direct property ownership.

Benefits of a DST

  • 1031 exchange suitable
  • Passive ownership
  • Quality commercial properties
  • Portfolio diversification
  • Rental income
  • Lower cost than whole property ownership

If you are an Accredited Investor, and would like more information about the opportunities and services available from AEI, please contact your financial advisor, or for a financial advisor referral you may contact AEI Investor Services at 800-328-3519.

Proven & reliable – America's debt-free sponsor

AEI is one of America's most experienced sponsors of commercial property investment programs for both cash investment and 1031 property exchanges. Over the past 43 years, AEI has sponsored 136 net leased real estate programs for more than 20,000 investors nationwide.

AEI believes that a debt-free approach to commercial property ownership provides an opportunity for consistent income combined with a high degree of capital protection.

*As of 12/31/2016