All Forum Posts by: Jon Taylor

@Brett Henricks No, a Delaware Statutory Trust (DST) cannot make capital calls. Once investors contribute funds, no additional investments are allowed.

No. Your depreciation recapture is only a 5% premium to your federal rate (15 or 20%) on what has been depreciated. 

If you’d like, I have an excel model I can share with you if you submit your info.

https://forms.gle/6cFJiuvCWstMnESZ9

@Michael Dahl - @Steve Wolterman said it well. An alternative option is to refinance before you sell. Generally, it's wise to let the loan "season" for 12 months and ensure it’s used for investment purposes. However, the cash you receive from refinancing is not taxable.

You’re right, @Dave Foster, I generally prefer to see DSTs used as standalone real estate investments with a 1031 exchange option on the backend. This allows investors, after the typical 3-5 year operating period, to either pivot back into sole ownership properties or exchange into the best DST available at that time.

In most cases, sponsors make this exit optionality explicit in the PPM. It’s quite rare for an optional 721 program to become a forced conversion.

@Steve Schaeffer, your RIA or BD’s investor relations team has been in contact with the sponsor quite regularly if this transaction is in process. They should have all of the program-specific information available for you.

If you’d like me to look into it directly, feel free to DM me.

Interesting, that does not sound good. They will likely request a copy of your most recent form 4562 and schedule E depreciation supplement and handle your individual depreciation schedule in the K-1 for the OP units.

Your current cost basis should carry forward and continue on your REIT OP investment. Meaning, your depreciation schedule should continue.

Do you have an *option* or are you *forced* to participate in the REIT? Does the REIT pay its cash dividend out of operating cash flow (AFFO), or is it paying its dividend out of paid-in capital?

@Bill B. - This is a great point of view.

@Cameron Nordin

A cost segregation study accelerates depreciation by classifying certain building components as personal property or land improvements, allowing them to be depreciated over shorter recovery periods (e.g., 5, 7, or 15 years instead of 27.5 or 39 years).

By accelerating depreciation, cost segregation lowers your tax basis more quickly than standard straight-line depreciation. This means that when you sell the property, your adjusted tax basis is lower, which increases the capital gain you must recognize.

Additionally, any accelerated depreciation taken is subject to depreciation recapture at a higher tax rate (up to 25% for real estate assets) rather than being taxed as long-term capital gains.

So, while cost segregation provides significant upfront tax savings, it also increases your capital gains tax liability upon sale unless you use a 1031 exchange or other tax-deferral strategies.

You can find your current tax basis by reviewing your depreciation schedule (Form 4562) and prior years’ tax returns, specifically looking at your adjusted basis on Form 4797 (for sales of business property) or Schedule D (for capital gains and losses).

Your CPA should be consulted prior to making any decisions. 

The key requirement for a 1031 exchange is that the taxpaying entity must remain the same. If the LLC is a single-member LLC, it is considered a disregarded entity for tax purposes, meaning the taxpayer remains the same (under the same Social Security number) and there would be no reason to change title prior to the sale. Make sure to consult with your CPA before making any changes.

I've done a bunch of 1031's in VA. Happy to help. I'll DM you.