How Hanson Capital Industrial Funds Provide the Ideal Solution for Your 1031 Exchange

Executing a 1031 Exchange can be a powerful strategy for investors aiming to defer capital gains taxes when selling real estate. However, navigating the intricacies of IRS regulations, finding suitable replacement properties, and managing the timing and structural complexities can be challenging—especially for investors seeking a more passive, professionally managed investment. This is where partnering with an experienced firm like Hanson Capital becomes crucial.

Understanding the 1031 Exchange

The IRS allows investors to defer capital gains taxes on the sale of real estate through a mechanism known as a 1031 Exchange. In essence, investors can exchange one piece of investment real estate for another of “like-kind” without recognizing a taxable gain at the time of the transaction. However, a common misunderstanding is that the tax liability is eliminated—it’s important to note that taxes are merely deferred until the new property is sold without a subsequent 1031 Exchange.

Common Challenges Investors Face

Executing a successful 1031 Exchange requires investors to adhere strictly to several critical rules:

• Identification Period: Investors must identify potential replacement properties within 45 days of selling the relinquished property.

• Exchange Period: The replacement property must be acquired within 180 days from the sale of the relinquished property.

• Like-Kind Requirements: The replacement property must qualify as like-kind according to IRS standards—typically this involves exchanging real estate for real estate.

These tight deadlines and rules can create significant pressure and complexity for investors, especially those looking for passive investment opportunities.

The Hanson Capital Advantage

Hanson Capital has successfully guided numerous investors through the 1031 Exchange process by providing strategic, compliant solutions to invest in professionally managed industrial real estate funds.

Direct Ownership as Tenants-in-Common

Unlike investments structured as securities, which do not qualify for a 1031 Exchange, Hanson Capital facilitates direct ownership in real estate through a tenants-in-common (TIC) structure. This ensures full compliance with IRS regulations while providing investors with an efficient and tax-effective investment pathway.

Transparent and Clear Ownership Structure

For example, if you contribute $2,000,000 from your 1031 Exchange proceeds and our Fund contributes an additional $3,000,000, you will hold a clear and direct 40% ownership interest in the industrial real estate asset, with the Fund holding the remaining 60%. This precise allocation simplifies reporting, aligns interests, and ensures your investment remains fully compliant with IRS requirements.

Expert Legal and Structural Support

Our dedicated legal team expertly establishes a separate subsidiary entity—called an Exchange Special Purpose Entity (Exchange SPE)—wholly owned by the investor. This strategic step isolates your 1031 Exchange from your other assets and liabilities, safeguarding your broader portfolio. Hanson Capital’s general partner entity assumes the responsibility of Manager, overseeing all aspects of day-to-day operations and property management. This ensures your investment remains entirely passive, freeing you from the complexities of direct real estate management.

Transparent Fees and Equal Treatment

Transparency and fairness are central to our philosophy. Investors in our Industrial Funds using a 1031 Exchange are treated identically to all other limited partners regarding fees. The Operating Agreement clearly outlines these fees, ensuring complete transparency and confidence in your investment.

Aligned Performance Incentives

To ensure our interests align seamlessly with yours, Hanson Capital’s management earns a profits interest in your Exchange SPE only upon achieving clearly defined, realistic performance benchmarks. This incentive structure guarantees that our focus remains firmly on maximizing asset performance and returns for all parties involved.

Benefits of Partnering with Hanson Capital

When you choose Hanson Capital for your 1031 Exchange, you receive:

• Professional Management: Access to experienced real estate professionals skilled at identifying and operating high-quality industrial properties.

• Compliance Assurance: Expert handling of the complexities involved in IRS regulations and tax-deferral requirements.

• Passive Investment: Complete freedom from daily operational responsibilities, allowing you to enjoy truly passive investment returns.

• Alignment of Interests: A transparent and fair partnership structure that prioritizes your financial outcomes.

Taking the Next Step

With the comprehensive support provided by Hanson Capital, investors can confidently execute their 1031 Exchange strategies, secure in the knowledge that their investment is managed professionally and effectively. By partnering with Hanson Capital, investors not only ensure compliance with IRS regulations but also gain peace of mind, professional oversight, and the potential for superior long-term returns.

Contact us today to discuss how we can help make your 1031 Exchange seamless, efficient, and rewarding.