For those real estate investors who want to move their investment in physical  real estate to the easier passive world of real estate investment trusts (REIT), there is an unfortunate tax hit awaiting them. Using a 1031 exchange is not an option available to you. The IRS views REITs as securities, not real estate, and therefore 1031 exchanges do not apply. An UPREIT and Section 721 can prove to be a tax-savvy tool to turn real estate into better giving.

As real estate investors age, nearly one million seniors each year choose to divest of their rental properties, looking to simplify their lives and ease into a retirement that no longer involves the labor of property management. However, these investment properties may have been held for decades; these owners are likely facing a huge capital gains tax bite. Selling the property could incur 20-30% in federal & state taxes. A 1031 exchange can help remove that tax bite.

Real estate is one of the largest sources of wealth but one of the least used sources of charitable giving.