Known as one of the most popular tools in the land industry for deferring capital gain taxes, 1031 Exchanges give landowners the opportunity to invest in new properties. But for the landowners who have managed their property for decades and may be ready for a break, but still want to own real estate, a tax savings vehicle known as a Delaware Statutory Trust (DST) could help.

What’s a Delaware Statutory Trust?

A DST is a separate legal entity created under Delaware law that qualifies under Section 1031 in the Internal Revenue Code as a tax-deferred exchange. In 2004, the IRS ruled that a DST is recognized as replacement property in a 1031 tax-deferred exchange.

A DST allows a person to have fractional ownership interests in real estate. An investor (beneficiary) of a beneficial interest in the DST acquires an undivided interest in the asset(s) that are held by the DST.

What are the benefits of a DST?

• The DST is the single owner and borrower
• Transfer of beneficial interests in a DST can be faster and easier
• Qualifies for 1031 Exchange
• Lower minimum investment allows flexibility
• No day-to-day management responsibilities for owners

What are some disadvantages of a DST?

• Some restrictions on transferability
• Locked in for a certain amount of time

*National Land Realty does not offer tax or legal advice. Please seek guidance from your CPA or Attorney.