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Paying Too Much Tax for Your Crowdfunded Investments?

Crowdfunding platforms have made investing in real estate easier than ever.

Additionally, real estate companies have access to more investors and are funding their real estate transactions at a faster pace and often more efficiently.

Investors have greater access to real estate opportunities through crowdfunding and have greater ability to pool their funds together with other investors to finance multi-million dollar properties they could not acquire as individual investors. These first-class, investment-grade properties acquired through crowdfunded offerings provide opportunities for potentially larger cash flows and appreciation returns than smaller, more affordable properties. Pooling funds can also empower investors to acquire a percentage of a portfolio of diversified real estate, mitigating the risk associated with owning a single property.

Real estate crowdfunding platforms offer a variety of real estate investment vehicles for the pooling of investor funds. Many of these offerings are syndicated as real estate investment trusts (REITs), limited liability companies, or partnerships. While investors are often pleased with the cash flows and the returns they have received from their investments made through these crowdfunding platforms, many have complained that their earnings are quickly diminished by the amount of taxes they pay on their gains upon exit of their investment.

We can understand that. Nobody wants to see a large percentage of his or her hard-earned gains disappear. We know investors would prefer to use those gains to increase their future investing power.

Crowdfunded Delaware Statutory Trusts (DSTs) give investors a chance to do just that. Crowdfunded DSTs enable investors to take advantage of the benefits of using crowdfunding platforms to find available offerings and make their investments, but they also give investors the ability to take advantage of tax deferral options through 1031 exchanges.

The purchase of a beneficial interest in a DST is treated as a direct interest in real estate, satisfying that requirement of IRS Revenue Ruling 2004-86. Because of this, a property owned by a DST is an eligible relinquished or replacement property for the purposes of a 1031 exchange. When completing a 1031 exchange of an investment property, investors can defer the taxes owed on the capital gains earned from the sale of their relinquished property and can reinvest their investment funds into a replacement property using their full buying power.

We believe paying any taxes for a real estate crowdfunded investment is too much tax when you could be deferring the tax payments by buying real estate through a crowdfunded DST. At 1031 Crowdfunding we have a variety of DST offerings available for you to browse. Whether you’re looking for a replacement property to complete your 1031 exchange or for a property that will be eligible to exchange at the time of sale, we can help you find a DST property to meet your investment needs.

If you’re paying too much tax on your crowdfunded investment, our experienced representatives would love to talk to you about other options and how to reduce your tax liabilities.

This material does not constitute an offer to sell or a solicitation of an offer to buy any security. An offer can only be made by a prospectus that contains more complete information on risks, management fees and other expenses. This literature must be accompanied by, and read in conjunction with, a prospectus or private placement memorandum to fully understand the implications and risks of the offering of securities to which it relates. As with all investing, investing in private placements are speculative in nature and involve a degree of risk, including loss of your principal. Past performance is not necessarily indicative of future results and forward-looking statements and projections are not guaranteed to achieve the results described and your actual returns may vary significantly. Investments in private placements are illiquid in nature and there may be no secondary market or ability to sell the investment should the need for liquidity arise. This material should not be construed as tax advice and you should consult with your tax advisor as individual tax situations will vary. Securities offered through Capulent, LLC, member FINRA, SIPC.