[quote=flu][quote=SK in CV][quote=flu]So question… Anyone know what a ” Deferred Sales Trust ” is, and how is it different from a 1031 exchange?[/quote]
A “deferred sales trust” is where the cash goes in between the sale of the 1st property and the purchase of the 2nd property for a 1031 exchange. Typically done by what’s called a 1031 accommodator.[/quote]
Can it be used to defer capital gains to prolong when you need purchase a replacement property ? If so how does it work?
For example, hypothetically, if I think real estate is at peak, and sell now, but want to wait, for example, 2 years before I buy a replacement property, is there any way to defer the capital gains from the sales of the first property by using some legal way to extend a property “exchange”?[/quote]
No can do. Replacement must be identified within 45 days, and transaction closed within 180 days of disposition of original property. These rules (as codified in 1979) are the result of a SC case, a guy named Starker, who attempted just what you’ve described, keeping the funds in hands of the buyer for up to two years and acquiring 12 pieces of replacement properties over that time. Starker partially won his case. Laws were rewritten to allow the deferred exchange with specific rules. Huge case when it went down, with expectations of a huge increase in tax free exchanges. Never really happened. They’re still pretty rare. People just don’t plan that well. Even when they are done, they’re often done wrong.
