A DST, or Delaware Statutory Trust, qualifies for deferred gain treatment under Section 1031. Watch a quick tutorial that explains further in detail how an Exchanger can acquire an interest in a professionally managed larger investment grade property which generates cash flow.
In many places across the country the investment real estate market is heating
up and exposing a new issue for certain investors.
Namely in some markets they’re simply more buyers than sellers causing a
difficulty in not only finding a suitable Replacement Property
but also in getting an offer accepted in a property under contract
Where this scenario has significant consequences is when the prospective buyers in the midst of completing a Tax Deferred Exchange pursuant to Internal Revenue code section 1031.
In these cases and by Statute.
The prospective buyer or exchanger has a 45-day window of eligibility in which defined and identify candidate or target properties
and further whatever he or she ends up purchasing for their exchange has to be a property that they previously identified.
So, if you have an arbitrary 45-day deadline to find and identify property you can imagine the stress and angst which is associated with identifying property in a superheated market where it’s difficult to get an offer accepted.
Now while a majority of exchangers do find property to identify and have no trouble completing their exchange within the 180-day time period a new alternative is emerged in the form of a DST or Delaware Statutory Trust.
which is an Institutional investment in which the exchanger requires an interest in a professionally managed larger investment grade property which generates cash flow.
The appeal of these professionally managed Investments are essentially these first acquiring a DST qualifies for deferred gain treatment under Section 1031
also acquiring a DST interest allows an exchanger the immediate ability to select from a portfolio of investment grade properties which are available from a particular Securities broker dealer
In addition, you can diversify into a number of DST interests because they are available in denominations as low as fifty to a hundred thousand dollars.
Also, the properties involved are all professionally managed investment grade cash flow properties and the DST sponsor can also assign you debt if you need to replace debt in your exchange.
And lastly for many exchangers DSTs are a way to transition from a more active role in
managing your property into a more passive or coupon cutting type ownership role for the future
Now since DST Investments are sold as the security they must be acquired through a licensed broker dealer
therefore they are only available to accredited investors meaning that a minimum
but modest net worth requirement is necessary before you can make such a purchase.
And that’s a little bit about DSTs.