July 15th is likely a day circled on the calendar of many people looking to complete a 1031 exchange. When the IRS issued Notice 2020-23, exchange transactions that fell between March 31, 2020 and prior to July 15, 2020 saw their deadline extended to July 15, 2020. In light of the COVID pandemic, the IRS issued this notice to provide extra time to complete an exchange. Certainly, I think we all were hopeful that by this time the worst of the pandemic would be behind us. Unfortunately, that does not seem to be the case.
With our country still in the midst of the pandemic, it may make it difficult for investors looking to exchange—to view property, inspect property, or obtain financing. Additionally, I have heard that the inventory of available property has been limited.
A Delaware Statutory Trust May Help
The Delaware Statutory Trusts (DSTs) may be a solution to these challenges. (Read more about DSTs from our previous blog post.) For many individuals, investing in a DST may be their preferred solution when exchanging. DSTs can offer potential income and potential appreciation while deferring taxes through fractional ownership of property, among other benefits.
Investors whose original intent was to buy property directly and continue to manage it themselves, but who were unable to complete their desired exchange as a result of the current pandemic, could consider a DST to complete the exchange. Since the DST already owns the asset and due diligence, financing, and other pre-purchase necessities have already been completed, it allows for an investor to evaluate and, in most cases, close on a DST in just a couple of days.
Our inventory of DST investments continues to remain strong. I do, however, anticipate a surge in demand in the coming weeks as the July 15th date nears, which might lead to some amount of limited inventory. If you’re in an exchange and interested in learning more, please do not hesitate to reach out to our team.