Understanding DST 1031 Exchanges

Understanding DST 1031 Exchanges

By | December 9th, 2021|Blog|0 Comments

Nothing comes to our mind other than a DST when we think about an investment option that offers excellent returns and promises long-term capital growth. If you haven’t had the chance to invest in a DST or learn about it, let’s see what a DST investment offers to investors?

What Is A DST?

A DST or Delaware Statutory Trust is a private company or trust created under Delaware statutory law. The concept of business trusts, especially those that include owning real property, is not new to the world. It dates back to the 16th century. However, DSTs received legal recognition after the Delaware Statutory Trust Act got IRS’s approval in 1988. 

The law defined all statutory trusts as private legal entities, separate from their trustee(s). This freedom of contract enabled the trustee(s) to structure their trusts to benefit all parties while providing liability protection similar to any other limited liability company.  

A Delaware Statutory Trust, like a unit investment trust or a fixed investment trust, owns and manages real estate and securities. Upon investing in a DST or purchasing DST shares, investors become beneficiaries of the trust’s assets. Moreover, as a DST is not taxed normally, all profits are distributed directly among the trust’s beneficiaries. DSTs let investors own income-producing assets without the burden of holding all property titles or managing them.

The IRS Revenue Ruling 2004-86 acknowledged DST investments as a suitable 1031 exchange replacement option. The ruling also stated that investors purchasing DST shares would get fractional ownership of the trust’s assets. In other words, purchasing DST shares equates to owning real estate in IRS’s views. Since then, small and medium-sized investors have been investing in DSTs to own large investment properties. 

Do You Want To Start A DST Investment?

A DST investment comes with several benefits, from offering monthly income to removing the burden of property management. Connect to one of our investment experts to learn more about DST investments and plan a DST 1031 exchange

“Our tax-deferred 1031 exchange programs can save millions in taxes, increase investor equity, and compound annual cash flow distributions and returns”