DSTs Offer Interesting 1031 Solution

Investors who are looking for properties to complete their 1031 exchanges often ask us if there are “arm chair investments” that allow investors to own fractional shares of properties. The good news is that the IRS has blessed the Delaware Statutory Trust (DST) for use as 1031 replacement property. Investors purchase interests in the Trust, which holds title to property. Investment in the real estate is shared amongst many investors. DST properties are institutional grade commercial properties, including properties such as apartment complexes, office buildings, retail buildings, and shopping centers.
Sue Speidel, Vice President of Inland Private Capital Corporation, has authored the below article which provides a great overview of DSTs.

Understanding the Delaware Statutory Trust (DST)

Investing in a multiple-owner DST which holds real estate may be a smart strategy to consider for cash investors, looking for 1031 replacement property. In addition to the tax benefits of owning real estate, and the benefit of having no hands-on property management responsibilities, investors will be poised to do a 1031 exchange upon the profitable sale of their real estate.

A Delaware statutory trust, or “DST,” is a legal entity created as a trust under Delaware law. One of the many business uses for the DST is to hold real estate. In the context of real estate, DSTs are formed pursuant to private governing agreements under which a property or several properties are held, managed, administered, and/or operated for profit by a trustee for the benefit of the holders of the DST’s beneficial interests.

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