Mar 06, 2024

Section 1031: Tax-free Real Estate Exchanges - What You’re Not Thinking About When You’re Thinking About Selling Your Farm

Louis Rogers, CEO of Capital Square, and his horse Tipperary Liadhnan Paddy out on cross-country. Photo courtesy of Capital Square

When you’re ready to downsize or sell your farm, countless variables are likely on your mind. Are you selling your horses or finding a new barn for them? Are you shifting your lifestyle or just your owned acreage? How do you ensure you’re not forgetting any crucial details?

Deferring or potentially even forgiving capital gains tax may not have crossed your mind, but tax-advantaged real estate investments present powerful opportunities to do exactly that. You’re familiar with the idea of building wealth through real estate, for yourself and for future generations. However, like a beautiful thoroughbred, real estate is far more than a one-trick pony.

Investing in real estate has countless advantages: stable cash flow, appreciation, depreciation deductions to shelter cash flow from tax and a hedge against inflation, just to name a few. Yet it’s Section 1031 of the tax code, legislation over 100 years old, that provides exceptional tax benefits not available for other investments. Are you aware that investment and business property can be sold, with the capital gains tax deferred (or even forgiven), if the seller takes advantages of Section 1031 of the tax code?

We’re not suggesting that you sell your farm to become a landlord and worry about tenants, toilets, and trash. On the contrary, Capital Square manages passive real estate investments that empower investors to access quality properties they would not be able to afford on their own through a largely automated, simplified Section 1031 exchange process.

Competing on an 1,100-pound animal with a mind of its own is incredibly challenging. And running a horse farm day in and out takes skill and hard work. But investing in tax-advantaged real estate opportunities can be simple and straightforward, provided you are working with the right manager.

Unlike an individual owner’s active management of rental property, fractionalized ownership of real estate through a Delaware statutory trust (DST), via a 1031 exchange, has numerous advantages. For example, the DST manager—not the investor—sources and manages the property on a turn-key basis. In addition to passive income and appreciation, DST investors defer capital gains taxes, and this tax deferral becomes full forgiveness if passed on to the next generation at the end of one’s life. Cash flow is paid to owners monthly by ACH directly into their bank accounts, with quarterly reporting and an annual audit.

Furthermore, by investing in multifamily real estate, an investor is focusing on the most stable, recession-resistant, inflation hedging asset type, as well as an asset type likely to see long-term rent growth and appreciation. Housing is essential, a necessity. Moreover, higher housing prices and mortgage rates have pushed even more people toward the rental market, which has increased demand in recent years and is expected to remain in-demand for years to come. Multifamily real estate is a long-term investment strategy with historical strength and legacy-building potential.

At Capital Square, we love talking about tax law, and we love talking about real estate. If neither of these subjects are something you discuss around the stable, that’s OK. We all have our specialties. This just happens to be ours.

Plus, we both share this understanding: a love of horses and the sport of eventing can change lives. You know it when you’re riding your favorite Irish Sport Horse on a warm spring morning, and you know it when you hear the sound of hooves echoing throughout the arena.

Thoughtful tax strategies when you’re selling your farm or investment property can change lives as well. Yours, as well as your family’s.

At Capital Square, we too are equestrians, and we are here to make taxes less taxing. We are just a call, email or text away. See you at the next competition.

Jul 02, 2024 Educational Activities

USEA Educational Activity Highlight: Sherwood Forest Hunter Pace | Sherwood Oregon | July 13, 2024

What’s a Hunter Pace? The Sherwood Forest Equestrian Center's Hunter Pace is a cross-country-style course around Sherwood Forest over various natural obstacles/terrain. The course ends with a final treat for riders to take in stunning views of Mt. Hood with a loop through the old Far Hill Farms field. The beginning of the course will first start with a warm-up loop around show jumping obstacles in the outdoor ring at Sherwood Forest and then riders will continue directly onto the course. Sign up as a solo rider, pair, or team.

Jul 02, 2024 Profile

No Longer Dreaming: Claire Allen's Goal of Qualifying for USEF Eventing Young Rider Championship is Now Reality

Claire Allen remembers when she was 11 years old, having just made the switch from the hunter/jumper ring to three-day eventing. She told her new eventing trainer that her goal was to one day compete in the United States Equestrian Federation’s Eventing Young Rider Championships.

Jul 01, 2024 Competitions

Alliston’s Busy Weekend, Braitling’s Reuniting with Five-Star Mount, & Kalkman’s Advanced Victory Highlight Twin Rivers Summer H.T.

As he was finishing tacking up his horse in preparation to navigate the cross-country course at the 2024 Twin Rivers Summer Horse Trials, James Alliston expressed concern about navigating the 101 Freeway. That’s because as soon as he crossed the finish line aboard Intermediate level winner Addyson (Ampere x Nickerbocker) at 10:38 a.m. on Saturday—his fifth cross-country round of the morning with three at Preliminary and two at Intermediate—the West Coast-based five-star rider had to drive 185 miles on the 101 Freeway from Twin Rivers Ranch in Paso Robles, California, to San Francisco International Airport to catch a 4:35 p.m. flight to Frankfurt, Germany.

Jul 01, 2024 Education

USEA Podcast #364: All Your Grooming Questions Answered

There is so much more to proper grooming than keeping your horse picture-perfect for the horse inspection. Good grooming practices are critical to proper horse management, no matter if you are planning for your next FEI appearance or your Starter level debut. To help you maximize your knowledge of grooming practices, we opened up the opportunity for USEA members to submit any questions they might have on our Instagram and Facebook stories. In this week's episode, Host Nicole Brown sits down with three of the highest-regarded grooms in this industry, Max Corcoran, Emma Ford, and Stephanie Simpson, and asks them all of your questions and more to help you perfect the art of grooming.

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Official Joint Therapy Treatment of the USEA

Official Feed of the USEA

Official Saddle of the USEA

Official Equine Insurance of the USEA

Official Forage of the USEA

Official Supplement Feeding System of the USEA

Official Competition & Training Apparel of the USEA

Official Horse Boot of the USEA

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