By CJ Follini | NOYACK Logistics
December 20, 2022
Part Six: Taxes II
The sixth piece in the Let’s Talk Logistics Real Estate series delves deeper into taxes. Those who own commercial real estate property may have the opportunity to take advantage of significant tax benefits when investing in a REIT. These benefits stem from deferring long-term capital gains tax, which requires diving deeper into some of the tax fundamentals discussed in the last piece. Read on for this overview and a discussion of two options for commercial real estate property owners to reap these benefits. Further, be sure to check out articles one, two, three, four and five if you missed them.
Taxes 201: Long-term capital gains tax deferrals
Investors pay capital gains tax when they sell an investment for a higher price than they purchased it. For example, someone who buys a $20 investment and sells it for $25 incurs $5 in capital gains. This gain is taxed in specific long-term capital gains brackets for investments held for a year or longer. Also, it is possible to defer taxes by investing in a traditional IRA or 401(k).
One key reason to defer these taxes is to increase your overall return. Imagine an investor defers $100 in long-term capital gains tax, and that money remains in an investment that earns a 10% annual return. If the investor finally sells the investment and must pay the capital gains tax in 20 years, that $100 has now grown to approximately $670. They’ll still owe the $100, and the other $570 is subject to taxation based on the long-term capital gains brackets. Even if the investor’s in the highest long-term capital gains tax bracket, they’ll still earn roughly $450 in additional profit
Option 1: The 1031 Exchange
Those who own a business property may have two opportunities to reap this type of tax benefit. The first is through a 1031 exchange, which allows someone to defer paying capital gains tax when selling a property. Specifically, the property owner must reinvest the funds into a ‘like-kind’ property defined by the IRS, though most real estate properties meet this criteria. However, note that U.S. properties must be exchanged with other U.S. properties and non-U.S. properties must be exchanged with non-U.S. properties.
Investors can use the 1031 exchange when investing in a REIT. Specifically, they would sell a business property into a Delaware Statutory Trusts (DSTs), which allows the owner to sell the DST to an affiliated REIT manager through electing a 721 exchange (discussed below). By doing this, any funds subject to capital gains tax would instead remain invested in the REIT, so the owner could defer paying those capital gains until they liquidated their assets from the new property.
Option 2: The 721 Exchange
Another option for commercial property owners is a 721 exchange, or an UPREIT (Umbrella Partnership Real Estate Investment Trust) transaction. Rather than sell the property like in a 1031 exchange, the property owner contributes it to a REIT fund. They then become an operating partner of the fund via ownership units that can be converted into REIT shares. Throughout this process, capital gains tax is deferred until the original property owner liquidates the ownership units or REIT shares.
Beyond the tax benefits, an UPREIT exchange comes with additional benefits:
Those who are interested in NOYACK’s logistics REIT can explore whether they qualify for a 721 exchange.
*Please consult a tax professional about your personal portfolio and tax needs.*
Future articles in this series will dive into the various ways that our logistics REIT can add value.
Share this article
January 20, 2023
January 6, 2023
December 12, 2022
Noyack Logistics Income REIT, Inc. “NLI” reserves the right, in its sole discretion, to modify, alter, or otherwise change these Terms of Service at any time with or without notice. Please review the Terms of Service statement periodically for changes. Your continued use of the Site constitutes your acceptance and agreement to be bound by these changes without limitation, qualification or change. If at any time you determine that you do not accept these changes, you must immediately discontinue use of the Site.
The use of this Site is restricted to U.S. Residents with a valid social security number that are 18 years of age or older. Children under the age of 18 are not eligible to participate in the offerings on the Site.
Although NLI attempts to provide accurate information, it does not guarantee the accuracy of information found on the Site. Your reliance on information found on the Site is at your own risk.
The Site, and its contents, are provided to you “as is,” without warranty of any kind, either express or implied. NLI makes no representations, express or implied, including, but not limited to, the implied warranties of merchantability, fitness for a particular purpose, title, non-infringement of the rights of third parties, data accuracy, systems integration, or quiet enjoyment.
NLI, its affiliates, suppliers and service providers do not warrant or make any representations regarding the use or the results of the use of the materials on this Site in terms of their timeliness, correctness, accuracy, reliability, or otherwise. While we make reasonable efforts to provide accurate and timely information, you should not assume that the information provided is always up to date or that this Site contains all the relevant information available. NLI undertakes no obligation to verify or maintain the currency of any information provided on the Site.
Under no circumstances will NLI, its affiliates, suppliers, or any others involved in creating this Site and its contents be liable for any damages or injury, including any direct, indirect, incidental, special, consequential, punitive, or other damages resulting from any circumstance involving this Site or its content (including, but not limited to, damages or injury caused by error, omission, interruption, defect, failure of performance, unauthorized use of this Site, lost data, delay in operation or transmission, breach of security, line failure, defamatory, offensive or illegal conduct of any user of this Site, or computer virus, worm, trojan horse or other harmful component), even if you have notified NLI in advance of the possibility of such damage.
The Site, and all of its contents, including but not limited to articles, other text, photographs, images, illustrations, graphics, video material, audio material, software, logos, titles, characters, names, and button icons (collectively the “intellectual property”), are protected by copyright, trademark and other laws of the United States, as well as international conventions and the laws of other countries. The intellectual property is owned or controlled by NLI or by other parties that have provided rights thereto to NLI. No portion of this Site may be reproduced, duplicated, copied, sold, or otherwise exploited for any commercial purpose that is not expressly permitted by NLI.
You may browse through the Site and occasionally download small amounts of material appearing on the Site that are of personal interest to you for your personal, non-commercial use. You must keep intact all copyright, trademark and other notices contained in your personal copies. You may not reproduce or allow others to reproduce your personal copies of downloaded materials, nor may you make them available electronically. You may not save or archive a significant portion of the material appearing on the Site. You may not attempt to alter or modify the content posted on the Site. Except as expressly set forth in this paragraph, you may not copy, download, display, distribute, publish, enter into a database, perform, modify, create derivative works, transmit, post, decompile, reverse engineer, disassemble or in any way exploit any of our intellectual property or the Site itself.
Other trademarks, service marks, product names, and company names or logos appearing on the Site that are not owned by NLI may not be used without express permission from their owners.
You may not use this Site for any purpose that is unlawful or prohibited by this Terms of Service statement, or cause damage on or through the Site. You promise that none of your communications with or through the Site will violate any applicable local, state, national or international law. Your access to the Site may be terminated immediately in NLI’s sole discretion, with or without notice, if you fail to comply with any provision of this Terms of Service statement.
NLI has no obligation to monitor the Site; however, you acknowledge and agree that NLI has the right to monitor the Site electronically from time to time and to disclose any information as necessary or appropriate to satisfy any law, regulation or other governmental request, to operate the Site, or to protect itself or other users of the Site.
NLI reserves the right, in its sole discretion, to modify, suspend, or terminate the Site and/or any portion thereof at any time for any reason with or without notice to you. NLI shall not be liable to you or any third party for any termination of your access to the Site.
You agree to indemnify, defend, and hold harmless NLI, its subsidiaries, agents, distributors and affiliates, and their officers, directors and employees from and against any and all claims, actions, demands, liabilities, costs and expenses, including, without limitation, reasonable attorneys’ fees, resulting from your use of the Site in a manner that violates or is alleged to violate these Terms of Service, any applicable law, or any warranty you provide herein, or otherwise arising in any way out of your use of the Site. NLI reserves the right to take exclusive control and defense of any such claim otherwise subject to indemnification by you, in which event you will cooperate fully with NLI in asserting any available defenses.
The Site may contain links to Web sites operated by third parties and may also provide third party content on our Site by “framing” or other methods. NLI does not monitor or control the content of any linked or framed sites and makes no representations regarding, and is not liable or responsible for, the accuracy, completeness, timeliness, reliability or availability of any of the content uploaded, displayed, or distributed, or products or services available at these sites. If you choose to access any third-party site or rely on information found within third party content appearing on this Site, you do so at your own risk. The presence of a link to a third-party site does not constitute or imply NLI’s endorsement, sponsorship, or recommendation of the third party or of the content, products or services contained on, or available through, this Site.
If you have questions regarding the Agreement or the practices of NLI, please contact us through our website: noyacklogistics.com.
When using noyacklogistics.com, we may collect the following information:
Contact Information: When you contact us using our online contact form, we collect the messages you send as well as the personal information you provide, such as your name, phone number, and email address.
Application Information: We require certain personal information when you apply online for an Investor account. In addition to basic details such as your name, email address, and phone number, we may require information to verify your identity, such as your social security number and driver's license number.
Log Data: When you access and use our website, we automatically record information concerning the device you are using and your activity on the Websites. This may include your device’s Internet Protocol (“IP”) address, your browser type, the types of information you search for and view on our website, locale preferences, location, identification numbers associated with your device, and your mobile carrier. If you arrived at our website by clicking on an advertisement, promotion, or search result on another website, we also take note of the web page you visited before you came to our website.
Please note that, if you delete or choose not to receive cookies from our website, the functionality of the websites may be impaired.
Additional information may be collected during your use of our website, or when we communicate with you via telephone, email or other means.
If you complete the account registration process, NLI or our business partners may collect information from third parties to verify your identity and bank account information and assess risks related to your account.
We use your information to verify your identity, provide you with quality customer service, evaluate your request for an Investor account and improve our website. We may be obligated by law to retain certain communications and other information concerning you. In addition, we may retain and use communications, transaction details, and identifying information to maintain audit trails for security and anti-fraud purposes.
NLI does not share information concerning you with unaffiliated third parties for marketing purposes. However, we may use your personal information to present you with information concerning offerings that may be of interest to you, via email.
Please note, the receipt of marketing communications via email is voluntary. If you do not wish to receive these communications, you may opt out at any time. To opt out please follow the steps below or contact us at (813) 438-6452 for assistance. If you choose to opt-out, you will continue to receive administrative emails from us.
We disclose information concerning you as necessary to run our everyday business, such as in connection with the movement of funds. We also may disclose information concerning you if required to do so by law or if we believe that such action is necessary to comply with a legal obligation.
NLI is committed to maintaining the security of your information. When you supply information to us through our website, we use TLS (Transport Layer Security) or SSL (Secure Socket Layer) protocols to secure the transmission of information. Once we receive information, we store and protect it using industry-standard firewalls and other technology. Please remember, though, that no method of electronic transmission or storage is 100% secure.
The NLI website is not intended for use by children under the age of 13. In order to use our services, you must be 18 years of age or older.
Customers can opt out of receiving marketing solicitations by emailing us at https://noyacklogistics.com/contact/
NOYACK Logistics Income REIT operates a website at noyacklogistics.com.
Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in partial or total loss.
While the data we use from third parties is believed to be reliable, we cannot ensure the accuracy or completeness of data provided by investors or other third parties.
Neither NOYACK nor any of its affiliates provide tax advice and do not represent in any manner that the outcomes described herein will result in any particular tax consequence.
Prospective investors should confer with their personal tax advisors regarding the tax consequences based on their particular circumstances.
Neither NOYACK nor any of its affiliates assume responsibility for the tax consequences for any investor of any investment.
THE OFFERING MATERIALS MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. YOU SHOULD READ THE OFFERING CIRCULAR