Frequently Asked Questions (FAQ)
Explore Common Questions From Investors
How does Baker 1031 Investments facilitate a tax-deferred 1031 exchange to defer capital gains taxes on investment property?
A 1031 exchange, facilitated by Baker 1031 Investments, is a tax strategy under IRC Section 1031 that allows you to defer capital gains taxes and depreciation recapture on the sale of an investment property by reinvesting the proceeds into a "like-kind" replacement property of equal or greater value. We ensure the process adheres to all IRS rules, preserving your tax-deferred status.
Do I need to directly swap property in a 1031 exchange, or can Baker 1031 guide me through a delayed exchange using a Qualified Intermediary?
No, direct swapping is rare. Baker 1031 Investments specializes in the delayed exchange—the most common structure. We partner with a trusted Qualified Intermediary (QI) to hold the proceeds, preventing your constructive receipt of the funds, which is critical for maintaining your tax deferral status.
What are the mandatory 1031 exchange deadlines (45-day identification period, 180-day exchange period), and how can Baker 1031 ensure compliance?
The IRS imposes two strict deadlines: the 45-day identification period to list your potential replacement properties after closing on the relinquished property, and the 180-day exchange period to close on the purchase. Baker 1031 Investments provides a streamlined process, including access to Delaware Statutory Trusts (DSTs), which are pre-packaged to help you meet these non-negotiable timelines.
Does the IRS limit the number of replacement properties I can acquire in a 1031 like-kind exchange with the help of Baker 1031?
The IRS does not restrict the number of properties. You can exchange one property for multiple replacement properties or multiple properties for one, provided you adhere to the Three Property Rule or the 200% Rule during the identification period. Baker 1031 helps structure your like-kind exchange to maximize portfolio diversification.
What are the core rules for achieving full tax deferral in a 1031 exchange (e.g., matching property value and using a Qualified Intermediary)?
To achieve full tax deferral with Baker 1031 Investments, you must (1) purchase a replacement property of equal or greater net value than the relinquished property, (2) reinvest all equity, and (3) use a Qualified Intermediary (QI) to avoid constructive receipt. Any shortfall in value or equity received is considered "boot" and is subject to capital gains tax in a partial 1031 exchange.
What is a DST 1031 property, and how does Baker 1031 Investments offer this replacement property option for 1031 exchanges?
A DST 1031 property is a Delaware Statutory Trust interest that the IRS recognizes as like-kind property for a 1031 exchange under Revenue Ruling 2004-86. Baker 1031 Investments provides access to institutional-grade, passive DST investments to help investors efficiently meet their 45-day and 180-day deadlines.
After a DST full-cycle event (sale), are investors able to execute another 1031 exchange into like-kind replacement property?
Yes. When a Delaware Statutory Trust reaches its full-cycle event and sells the underlying asset, the proceeds are released to your Qualified Intermediary, allowing you to execute another 1031 exchange into any other like-kind replacement property (such as a different DST, a raw land asset, or a traditional commercial property).
What key restrictions must I follow for delayed and reverse 1031 exchanges, specifically regarding constructive receipt and using a Qualified Intermediary?
The absolute restriction is constructive receipt: you cannot touch the sale proceeds. Both delayed exchanges and reverse exchanges require the mandatory use of an unrelated Qualified Intermediary (QI) to hold the funds or park the property, ensuring the tax-deferred status is maintained per the safe harbor rules. Baker 1031 partners only with reputable QIs to mitigate this risk.
How do I compute the basis in the new property after a 1031 like-kind exchange, and how does this affect deferred gain and future depreciation?
The basis in the new property is generally the adjusted basis of the relinquished property, plus any cash or debt added, minus any boot received. This calculation ensures the original deferred gain is preserved, resulting in a lower depreciable basis in the new asset. Your tax professional must track this transferred basis for accurate future capital gains and depreciation deductions.
Do DST investors receive a K-1 or a Substitute 1099 for tax reporting, and how does my CPA report DST rental income on Schedule E?
DST investors typically receive a Substitute 1099 (an operating statement showing your pro-rata share of income and expenses), not a K-1 (which is common for partnerships/LLCs). Your CPA will report the DST rental income and associated depreciation on Schedule E of your personal tax return, identical to how you report income from a directly owned rental property.
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The information herein has been prepared for educational purposes only and does not constitute an offer to purchase or sell securitized real estate investments. Such offers are only made through the Sponsor’s Private Placement Memorandum (PPM) which is solely available to accredited investors and accredited entities. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over $1 million dollars exclusive of primary residence) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney.
There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potentially adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk. Because investor situations and objectives vary this information is not intended to indicate suitability for any particular investor. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation.
Securities offered through Aurora Securities, Inc. (ASI), member FINRA/SIPC. Baker 1031 Properties (Baker 1031) is independent of ASI. To access Aurora Securities’ Form Customer Relationship Summary (CRS), please click HERE. Baker 1031 Properties, Jerry Baker, and (ASI) do not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstances.
Client examples are hypothetical and for illustration purposes only. Individual results may vary.
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¹The statement that "Over 30% of all experienced real estate investors work with Jerry on their 1031 exchange" is a market share estimate derived from an analysis of third-party market data as of October 2025, representing the proportional relationship between the Baker 1031 Investment investor database and an estimated total market of active real estate investors; this estimate is based on Crexi reporting a 2,000,000 user base, 80% of whom are assumed not to be agents/brokers, and 42% of activity dedicated to investment sales, from which a conservative assumption excludes 15.7% as non-investor service providers (e.g., appraisers, lenders), resulting in an estimated active investor market of 566,664; as the Baker 1031 Properties database comprises over 170,000 individuals or entities, this figure represents 30.00% of the estimated market. Important Compliance Disclosure: The figures and calculations provided constitute a market share estimate based on unverified third-party data and internal assumptions utilized to define the estimated market; Baker 1031 Properties has not independently verified the accuracy of the underlying data, and the term "experienced real estate investors" is defined exclusively by this methodology and its internal assumptions. This communication is not a guarantee of future results, a testimonial, or a statement of performance for any investment product or service, and its accuracy is subject to the inherent limitations of the underlying data and the validity of the internal exclusion assumptions.