Answer
Feb 13, 2025 - 11:30 AM
Well, yes, in any read investment, you will pay capital gains tax when you liquidate that investment just like you would a mutual fund or any asset whatsoever that's not inside an IRA. It's going to trigger some degree of capital gains or the potential for capital gains when you sell an asset. If you invest in a read with cash, then you put in $100,000 in a read and sell it five years later, you are going to pay capital gains tax and you will have some depreciation recapture on that because you've been getting depreciation benefit from that read just like you get depreciation benefit from owning a rental property. Whereas, but there's still going to be sort of a cap on that capital gains tax based on the fact that you invested cash and it was a relatively short amount as opposed to if you, you know, this, this is in the context of a 1031 exchange and you own a property for 20 years, then went into a pre-read DST and then you're in a read and then you sell it, then you can count on pretty much that entire redemption being taxable because now in all likelihood, you're looking at that being treated as entirely gain or very close to entirely gain. So the extent to which you're going to be taxed on that redemption or sale is really a function of time and how much depreciation that you, you know, that you've claimed over time.
