What Is A 1031 Exchange?
At Breakwater Exchange, we help you unlock the full potential of the 1031 exchange, an IRS-backed strategy for deferring capital gains taxes when selling an investment property.
DST 1031 Explained
Let’s first identify a DST’s (Delaware Statutory Trust) meaning. A 1031 exchange, named after Section 1031 of the IRS tax code, lets you sell one investment property and reinvest the proceeds into another of like-kind, without immediately paying capital gains taxes. However, it’s not automatic. The IRS enforces strict timelines and property criteria, making expert guidance essential. Breakwater Exchange assists every step of your exchange, from identifying replacement properties to working with a qualified intermediary that meets federal guidelines and your financial goals.
Key Rules You Need to Know About 1031 Exchanges
1031 exchanges come with three foundational requirements: the properties must be like-kind (meaning both are investment real estate), the new property must be of equal or greater value to receive full tax deferral, and the ownership structure must match. Miss one of these? You risk disqualification.
What Properties Qualify for a 1031 Exchange?
Not all real estate qualifies. Investment properties such as rental homes, commercial buildings, and land held for income or appreciation are eligible. Primary residences, vacation homes, or properties held for personal use don’t count. The replacement property must also be in the U.S., and it must be held for the same investment purpose as the relinquished asset.
1031 Exchange Identification Rules & Timeline
Once your relinquished property sells, the clock starts ticking. The IRS allows only 45 days to identify potential replacement properties and 180 days to close. Miss either deadline, and the exchange fails, triggering a taxable event. That’s why Breakwater Exchange helps you build a strategy before your sale closes, so you’re always ahead of the curve.
Our Exclusive Line of 1031 Exchange Solutions
At Breakwater Exchange, we offer a curated suite of 1031 exchange solutions tailored to meet your investment goals, liquidity needs, and control preferences. Each option is designed to help you defer taxes while aligning with your unique financial strategy.
- Traditional DSTs provide passive ownership in institutional-quality real estate with professional management, diversified risk, and simplified 1031 compliance.
- Cash Out DSTs offer strategic liquidity by allowing you to replace debt efficiently while gaining access to a portion of your equity, without triggering taxable events.
- Direct Title Security Solutions gives you 100% ownership of a single property through an LLC, offering full control over refinancing, sales timing, and long-term strategy.
