1033 Guidelines

IRC §1033 guidelines allow an investor to reinvest proceeds from an involuntary conversion into a like-kind real estate exchange to qualify for full tax-deferred benefits. An exchange is completed most often with a reinvestment of the proceeds of an involuntary eminent domain conversion into 'like-kind' real estate investment. Personal residences and vacation homes that are not utilized primarily as rentals are not “like-kind' to investment real estate and do not qualify for a §1033 exchange.

The §1033 exchange can allow a landowner anywhere from 2 to 3 years from the date of the forced conversion to close on a replacement, like-kind real estate investment to complete the exchange. §1033 does not have any identification requirements, which allows the client to select any number or combination of assets to complete a §1033 exchange. An exchange is considered complete when an actual purchase is completed, and the title is passed to the investor. This must be completed before the exchange deadline expires.

A qualified intermediary (QI) is not needed in a §1033 transaction. The funds can be held by any entity until the close of escrow. Investment losses of the conversion proceeds before the exchange do not alleviate the taxpayer's requirement to complete a §1033 exchange with a value equal to or greater than the forced conversion. Safe-keeping of §1033 funds could make the exchange process run more smoothly. A properly structured exchange may provide the investor the opportunity to retain a portion of his or her conversion proceeds tax-free. The tax code allows leverage in the exchange of §1033 proceeds.

Investors should consult with tax professionals, attorneys, and exchange specialists to determine the best course of action.

DST 1031 and 1033 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only.  If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney. There are risks associated with investing in real estate and Delaware Statutory Trust (DST) properties including, but not limited to, loss of entire investment principal, declining market values, tenant vacancies and illiquidity. Diversification does not guarantee profits or guarantee protection against losses. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. The information herein has been prepared for educational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. Because investors’ situations and objectives vary, this information is not intended to indicate suitability for any particular investor.  This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation. Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Insurance products offered through Concorde Insurance Agency, Inc. (CIA). Fortitude Investment Group is independent of CIS, CAM and CIA.