What is a DST 1031 Exchange? Discover the often overlooked benefits of the Delaware Statutory Trust and 1031 Exchange laws, and how you can take advantage of them for your real estate investing strategies.
By Matt McFarland, Vice President, & Thomas Wall, Associate, Kay Properties & Investments
T
he Kay Properties team recently participated in an investment property industry trade show, and were pleased to see so many people stopping by our booth asking about Delaware Statutory Trust 1031 exchanges. However, because we found ourselves answering the same questions again and again from some very experienced investment property owners, we thought it might be a good idea to write about the three most commonly asked questions we heard that relate to DST 1031 Exchanges, including: 1. What Is A Delaware Statutory Trust And What Are The Associated Risks? 34
1031 DST Digest
2. What can a Delaware Statutory Trust do for me? 3. Do I have to have a Delaware address to invest in a Delaware Statutory Trust? First, of course you don’t have to live in Delaware to invest in a “Delaware Statutory Trust.” Delaware was the state where the law defining a DST and its structure was created, and what’s so special about this real estate investment vehicle is that it’s blessed by the IRS to qualify as “like-kind” investment property for the purposes of a 1031 exchange. Internal Revenue Code (IRC) Section 1031 allows investors to postpone paying tax on the gain
of a relinquished property by reinvesting the proceeds in similar property as part of a qualifying likekind exchange.
What is a Delaware Statutory Trust? A Delaware Statutory Trust is a real estate ownership structure that allows multiple investors to each hold an undivided beneficial interest in the holdings of the trust. The term “beneficial interest” means that investors hold a percentage of the ownership, and no single owner can claim exclusive ownership over any specific aspect of the real estate. The laws of DSTs allow the trust to hold title to one or more investment properties that can
