721 UPREIT BENEFITS

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Section 721 of the Internal Revenue Code allows a property owner to contribute their property to a real estate investment trust (REIT) in exchange for an interest in the REIT. The process is sometimes referred to as a 721 UPREIT or UPREIT transaction.

Reduce Risk

Provides a means to eliminate liability risks associated with directly owning commercial real estate.

Continued Income

Provides a process to sell/exchange commercial real estate, while investors can still enjoy the benefit of regular income from real estate assets through ownership in an REIT.

Save Time

Provides freedom to simultaneously enjoy important life activities while your professionally managed real estate accrues passive income.

Exit Strategy

Provides an alternative process to sell/exchange commercial real estate.

Diversification

Provides the opportunity to own various types of real estate across the central part of the United States.

Defer Taxes

Provides investors a process to defer taxes on capital gains and certain recapture taxes so long as the UPREIT holds the real property and the investor holds their interest in the REIT.

1031 EXCHANGE BENEFITS

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During a typical transaction, a property owner is taxed on the gain realized from the sale of their property. Section 1031 of the Internal Revenue Code (IRC) allows an investor to postpone paying tax on the gain if you reinvest the proceeds in similar real estate. This is called a like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred; however, it is not tax-free.

A 1031 exchange is a method for selling one qualified property and purchasing another qualified property within a specific period of time. While the process of selling and buying is similar to any standard sale and purchase, a 1031 exchange is treated by the IRS as an exchange—not a sale.

Increased Buying Power

Provides owners with more money to invest in the replacement property.

Continued Income

Provides a process to sell/exchange commercial real estate, but investors can still enjoy the benefit of regular income from real estate assets through ownership in an REIT.

Save Time

Provides freedom to simultaneously enjoy important life activities while your professionally managed real estate accrues passive income.

Exit Strategy

Provides an alternative process to sell/exchange commercial real estate.

Diversification

Provides a means to reallocate, consolidate, or diversify your investment portfolio through the purchase of different qualified properties.

Defer Taxes

Provides investors a process to defer taxes on capital gains and certain recapture taxes so long as the UPREIT holds the real property and the investor holds their interest in the REIT.

COMBINING THE BENEFITS

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Property owners working with a REIT may be able to combine the benefits of a 1031 exchange and a 721 UPREIT. In this combined transaction, the property owner sells their investment property and receives an interest in a REIT.

Interested in a 1031 Exchange?

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