1031 Exchange via DST
Selling an Investment Property Can Raise More Than a Tax Question
- For many, an investment sale represents more than a simple transaction.
- It can have a lasting impact on future tax liability.
- Deferring that tax may help preserve more of your equity for what matters next.
- Let's look at how a 1031 exchange using a Delaware Statutory Trust (DST) can help you stay invested, defer taxes, and build toward long-term financial goals.
- We help investors use tax-smart tools to meet their investment objectives and create more flexibility in their financial plan.
- Our team will walk you through how a Section 1031 exchange DST could work to support your goals.
What Is a 1031 Exchange?
A 1031 exchange allows real estate investors to defer paying capital gains taxes when they sell an investment property and reinvest the proceeds into a like-kind replacement property.
DST exchanges are especially useful because:
They provide access to institutional-quality real estate.
They offer diversification across multiple assets.
The are professionally managed and passive.
A DST can be a powerful solution for investors looking to defer taxes while simplifying property management and increasing portfolio diversification.
What Is a Delaware Statutory Trust (DST)?
A Delaware Statutory Trust (DST) is a legal entity that owns and manages income-producing real estate. Investors purchase a beneficial interest in the trust.
DSTs are structured to qualify for 1031 exchanges and are managed by experienced sponsors who handle asset operations, distributions, and reporting.
This allows investors to benefit from real estate ownership—without the active responsibilities of managing property.
Key 1031 Exchange Requirements
Section 1031 generally permits qualifying exchanges of investment real estate into like-kind replacement real estate. When applicable requirements are satisfied, gain recognition may be deferred.
How It Works
01
Exchange property is sold
Close on the sale of your investment property.
02
Proceeds are held by a qualified intermediary
The funds are held safely while you identify a replacement property.
03
Replacement property is identified
You identify one or more DST investment opportunities within 45 days.
04
DST may be considered
You review DST offerings and select the one that aligns with your goals.
05
Exchange is completed
The purchase of the DST is completed, and you defer capital gains taxes.
Common Situations Where a DST May Be Considered
A DST may be evaluated in several common 1031 Exchange situations, particularly when timing, replacement-property selection, boot exposure, or property-management responsibilities become concerns.
Example: When a Replacement Property Falls Through
This example illustrates why some knowledgeable investors identify one or more DSTs as backup replacement-property options during the 45-day identification period.
The goal is not to assume the primary transaction will fail. Rather, identifying backup DSTs may help preserve optionality if the investor later faces timing issues, closing delays, boot concerns, or a desire to reduce direct property-management responsibilities.
| What Happens | Why It Matters |
|---|---|
|
Primary property and backup DSTs are identified during the 45-day period |
The investor may preserve a backup replacement-property option if the primary transaction later cannot close |
|
Primary transaction runs into a closing issue after day 45 |
Title, financing, inspection, or other issues may prevent the primary property from closing |
|
Limited time remains before the 180-day deadline |
The investor may not have enough time to locate, evaluate, and close on another property |
|
Previously identified DSTs may remain available as backup options |
If properly identified, DSTs may provide backup replacement-property options. |
This illustration is hypothetical and for educational purposes only. DST availability, suitability, exchange treatment, and tax outcomes depend on investor circumstances, offering availability, exchange requirements, timing, and professional advisor review.
How This Fits Into a Broader Plan
TAX EFFICIENCY
May help defer recognition of capital gain and keep more equity invested.
PORTFOLIO STRATEGY
May support portfolio diversification and potential income.
LONG-TERM PLANNING
Allows you to move forward with a plan that aligns with your long-term goals, including liquidity needs, risk tolerance, and estate-planning objectives.
Important Considerations
Illiquidity
DST investments are illiquid and intended for long-term ownership.
Costs and Fees
There are fees, expenses, and potential conflicts of interest.
No Guarantee of Future Results
Past performance does not guarantee future results.
Changing Laws and Regulations
Tax laws and regulations can change.
Seek Professional Advice
Consult your CPA or tax advisor before making a decision.
Start the Conversation
A 1031 Exchange via DST is rarely evaluated in isolation. It is typically considered as part of a broader discussion about capital gains exposure, replacement-property options, liquidity needs, income objectives, risk tolerance, and long-term planning.
For many investors, the question is not whether a 1031 Exchange or DST exists. The question is whether it may be appropriate for their specific situation.
Global Pacific Securities works alongside investors and their CPAs or other professional advisors to:
- explain how 1031 Exchange DST strategies work;
- review timing, eligibility, and structure;
- evaluate potential replacement-property options; and
- determine whether a DST may fit within a broader investment strategy.
Schedule A Strategy Consulation
This material is for informational purposes only and is not tax, legal, accounting, or investment advice. Investors should consult their own tax, legal, and financial advisors regarding their specific circumstances. Private investments involve risk, including possible loss of principal, illiquidity, limited transferability, and lack of a guaranteed secondary market. Suitability depends on each investor’s objectives, risk tolerance, liquidity needs, tax circumstances, and applicable offering requirements.
Disclaimer
Unless indicated otherwise all securities offerings are made through Global Pacific Securities US, Inc., a broker-dealer registered with the SEC and Member of FINRA and SIPC. This communication is for informational purposes only, is not an offer, solicitation, recommendation or commitment for any transaction or to buy or sell any security or other financial product, and is not intended as legal, investment or tax advice or as a confirmation of any transaction. Prospective investors should inform themselves and seek their own independent legal, tax, financial or any other advice and take the appropriate advice as to any applicable legal requirements and applicable taxation and exchange control regulations in the countries of their citizenship, residence or domicile before engaging in any investing activity. For risks of private placements, please read the Important Information. Client examples are hypothetical and for illustration purposes only. Individual results may vary. Key Considerations: (1) Please refer to the Private Placement Memorandum (PPM) of the specific investment. (2) Investors should be aware that income distribution is not guaranteed and is subject to change based on various factors including market conditions, and cash availability. Please refer to PPM of the specific investment. (3) The rates are different for each investment and should not be construed as a guarantee as the actual distribution rate may vary based on the performance of the investment. (4) The minimum investment amounts are hypothetical and may vary based on specific investment opportunities.