Planning for the Future
Planning for the Future

Real Estate Exchange Trust

Owners of commercial real estate may be able to benefit from the utilization of a 1031 "Starker" Exchange Trust when seeking to sell property and acquire a different parcel. The Internal Revenue Code Section 1031 provides for the tax-deferred exchange of commercial property for a similar type of property. Taxes are not paid at the time of the sale if a Starker Trust is used to acquire similar property within a specified period of time.

For this to happen, the person, or corporation seeking to sell the property in question must establish a Starker Trust. The proceeds from the sale of the property are placed into the trust. After closing on the sale of the property being exchanged, the exchanger has 45 days to identify up to three replacement properties. The closing on the replacement property must occur no later than 180 days from the initial closing on the property being exchanged. Properties being exchanged must be used for investment. Personal residences are not exchangeable.

Jackson County Bank, through its Trust Department, can act as trustee for 1031 Exchange Trusts. This arrangement is not always beneficial to everyone. You are encouraged to seek the advice of your attorney and tax advisor to determine how the use of a Section 1031 “Starker” exchange will affect your situation.

Our fees for serving as trustee for a Starker Trust are quoted individually, based on the details of the situation.

The bank does not offer legal or tax advice, on this or any matter, but will work with the attorneys and accountants of the person or entity making the exchange to ensure the process is carried out in accordance with the Internal Revenue Code.

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