Starker Trust is a type of trust used in a 1031 exchange that is named after the case, Starker v. United States, which established the legality of delayed exchanges. In a Starker Trust, the sale proceeds from the relinquished property are placed into a trust, and the investor has a specified period of time to identify and acquire the replacement property.
Key-Takeaway
- A Starker Trust is a type of trust used in a 1031 exchange to hold the sale proceeds from the relinquished property.
- The investor has up to 180 days from the sale of the old property to identify potential replacement properties and up to an additional 180 days to acquire the replacement property.
Example
Consider an investor who wants to sell a rental property and purchase a new rental property using a 1031 exchange. The investor sells the old property and the proceeds are held by a Starker Trust. The investor then has up to 180 days from the sale of the old property to identify potential replacement properties and up to an additional 180 days to acquire the replacement property.
Tips
- Consider the benefits and drawbacks of using a Starker Trust, including the added time and administrative requirements.
- Plan ahead and be aware of the deadlines and requirements for a Starker Trust.
Advice
- Seek professional guidance from a qualified intermediary and a tax advisor to determine if a Starker Trust is the best option for your specific situation.
- Be aware of the strict rules and requirements for a 1031 exchange, including the need to complete the exchange within the specified timeframe.
Recommendations
- Consider using a Starker Trust if you need additional time to identify and acquire the replacement property in a 1031 exchange.
- Take the time to understand the requirements and rules for 1031 exchanges and Starker Trusts, and seek professional guidance if necessary.
