Delaware Statutory Trust

1031 DST Investment Overview

A DST is an acronym for a Delaware Statutory Trust which is fractional ownership, a separate legal entity created as a trust under the laws of Delaware in which each owner has a beneficial interest in the DST for federal income tax purposes and is treated as owning an undivided fractional interest in the property. In 2004 the IRS issued a Revenue Ruling clarifying the terms on structuring a DST investment for 1031 purposes. Please review the IRS Revenue Ruling 2004-86.

Delaware Statutory Trusts (DSTs) Can Be A Good Solution To Common 1031 Exchange Challenges. Learn more about the benefits of DST’s.

Contact us for more information on 1031 Exchanges in the form of DST.

Learn more about Delaware Statutory Trust (DST)

What is a 1031 Exchange DST Property?

Delaware Statutory Trusts, or DST, began in 2004 with the IRS Revenue Ruling 2004-86 which detailed the best structure. Each 1031 Exchange DST is a separate legal entity and each investor receives “beneficial interests” in the DST or trust for IRS 1031 purposes.

1031 Exchange DSTs are undivided fractional interest ownership in a trust. DSTs have low minimum investment amounts and therefore create an ability to diversify your current rental property into multiple investments in different cities, states, and asset classes such as apartments and net lease retail.

Delaware Statutory Trusts Explained

A DST is a separate legal entity created as a trust under Delaware statutory law. Delaware law permits a very flexible approach to the design and operation of the entity. However, to use a DST in a Section 1031 tax-deferred exchange private placement program, it is necessary to comply with the requirements of IRS Revenue Ruling 2004-865 so that a beneficial interest in the trust is treated as a direct interest in real estate for income tax purposes.

It is also necessary to meet lender requirements, especially if the loan is to be securitized. An efficient and popular vehicle for protecting assets and structuring capital market transactions, a Delaware Statutory Trust is often the special purpose entity of choice for securitizations, liquidations, premium finance programs, life settlements, investment funds, real estate acquisitions, tenant-in-common structures, and much more. CSC Trust Company of Delaware (CSC Trust) can assist you in forming a Delaware Statutory Trust in a cost efficient and expeditious manner.

Whether you need active trust administration or a passive resident trustee solely for the purpose of meeting statutory requirements, we will partner with you at every stage to ensure the success of your transaction.

Top Reasons to Turn 1031 Exchanges into Delaware Statutory Trusts (DST)

Delaware Statutory Trusts Can Be A Good Solution To Common 1031 Exchange Challenges

Delaware Statutory Trusts (DSTs) Likely Defer 100% Capital Gains Taxes & Avoid Taxable Gains on Boot

1031 exchange Into DSTs allows deferral of higher taxes and the 2013 Obamacare Medicare surcharge of 3.8%. Total taxes on investment real estate sales can exceed 40 to 55% making 1031 exchange an option to defer capital gains taxes. The exact dollar amount of the replacement property is a common challenge in 1031 transactions. An investor may sell a relinquished property for $1,000,000 and then find a replacement property for $825,000. The difference in the price of the relinquished property and the price of the replacement property results in a taxable amount on the remaining $175,000. Purchase a DST for $175,000 and defer all capital gains taxes.

DSTs May Solve for Lack of Inventory In The Market

There are limited listings in today’s real estate market making it difficult to find suitable 1031 exchange replacement properties. DSTs are prearranged replacement properties that can close in as little as three business days.

Access Institutional Quality Real Estate

DST investors can access institutional quality 300-unit apartment complexes, long term leases with high quality credit tenants and other quality real estate normally not available to individual investors. Institutional quality properties can exceed $40,000,000 in price – however  –  DST investors can access these properties with as little as $100,000 in equity.