DSTs and 1031 Exchanges

The IRS treats DST interests as like-kind property for 1031 exchange purposes Investors can defer capital gains taxes by exchanging into a DST Multiple DSTs can be combined to meet exact exchange amount requirements A qualified intermediary must hold exchange proceeds during the process

Benefits and Structure

Completely passive with no tenant calls, repairs, or management duties Minimum investments generally range from $25,000 to $100,000 Hold periods are typically 5 to 10 years with no early exit option Depreciation deductions pass through to individual investors

DST vs. Tenants in Common (TIC)

TIC investors hold direct deed interests while DST investors hold trust interests TICs are limited to 35 co-owners; DSTs can have hundreds of investors DST investors cannot vote on property decisions or make capital improvements TICs allow refinancing and new leases; DSTs are restricted by IRS rules

Tax Treatment and Depreciation

Investors receive K-1 forms reporting income, losses, and depreciation Depreciation may shelter a portion of cash distributions from current taxes Upon sale, investors can execute another 1031 exchange to continue deferral At death, heirs may receive a stepped-up basis eliminating deferred gains

Risks and Limitations

Investments are illiquid with no secondary market for most DST interests Investors have no control over property management or disposition timing Sponsor fees and commissions can reduce net returns meaningfully Property-level risk remains as vacancies or market declines affect returns

Who DSTs Are Best For

Landlords seeking to exit active management while deferring capital gains Retirees who want real estate income without operational responsibilities 1031 exchange buyers needing to identify replacement property quickly Sponsor quality and fee transparency should be evaluated carefully

Delaware Statutory Trusts

Curated by: Rubric Advisors

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What Is a Delaware Statutory Trust?

A legal entity that holds title to real estate on behalf of investors
Each investor owns a beneficial interest, not a direct deed to the property
Typically holds institutional-quality properties like apartments or warehouses
Managed by a professional sponsor who handles all property operations

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What Is a Delaware Statutory Trust?

DSTs and 1031 Exchanges

Benefits and Structure

DST vs. Tenants in Common (TIC)

Tax Treatment and Depreciation

Risks and Limitations

Who DSTs Are Best For

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What Is a Delaware Statutory Trust?

DSTs and 1031 Exchanges

Benefits and Structure

DST vs. Tenants in Common (TIC)

Tax Treatment and Depreciation

Risks and Limitations

Who DSTs Are Best For

Related Topics

Art & Collectibles Investing: Passion Assets in Your Portfolio

Real Estate Syndications

Selling Rental Property: Tax Playbook