Delaware Statutory Trust (DST) Exchanges: Potentially Reduce Tax Liability & Mitigate Risk-Brochure

Brochure - What Is A DST?

Pdf Summary

A Delaware Statutory Trust (DST) exchange is a form of a 1031 exchange where investors can defer capital gains taxes by reinvesting the proceeds from the sale of an appreciated asset into professionally managed real estate, rather than managing the property themselves. This differs from a traditional 1031 exchange, which requires investors to actively manage the replacement property.<br /><br />Section 1031 of the IRS tax code allows taxpayers to sell an appreciated property and purchase another of equal or greater value without incurring immediate capital gains taxes. The replacement property must also bear equal or greater debt, and all sale proceeds must be reinvested to maintain tax deferral. Since 1995, the IRS has permitted purchases through the DST format for shared ownership of professionally managed real estate.<br /><br />Investors considering a 1031 DST Exchange may benefit from predictable income streams, passive real estate ownership, and the potential to invest in newer properties across diverse markets. Further advantages include diversified holdings, state tax savings, and the opportunity to pass appreciated assets to heirs with a potentially favorable tax basis adjustment.<br /><br />Eligible properties for a DST exchange typically include rental properties, shopping centers, and office buildings, excluding securities, bonds, and personal-use property. Key considerations include the timeline requirement of identifying a replacement property within 45 days and completing the purchase within 180 days.<br /><br />While a DST exchange offers significant tax deferral benefits, it involves risks like property value loss, possible foreclosure, illiquidity, and potential cash flow disruptions. Investors should be cautious of transaction fees and consult financial advisors due to complex tax implications and the investment's inherent risks.

Keywords

Delaware Statutory Trust

1031 exchange

capital gains tax deferral

real estate investment

passive ownership

diversified holdings

replacement property

IRS tax code

property management

financial advisors