Delaware statutory trusts are private governing agreements under which property is held, managed, administered, invested, and/or operated for profit by one or more trustees for the benefit of the trustor entitled to the beneficial interest in the trust property.
It is a popular tax-deferral investment strategy for estate planning or investors who want to transition from active to passive ownership. DST investments are offered as replacement property for accredited investors seeking to defer their capital gains taxes through a 1031 tax-deferred exchange and as straight cash investments for those wishing to diversify their real estate holdings.
DSTs are structured as pass-through entities for tax purposes, meaning rental income, expenses, and depreciation deductions flow directly to investors (typically reported via a grantor trust letter rather than a K-1). This allows investors to claim their pro rata share of depreciation on their personal tax returns, enhancing tax efficiency—especially when paired with strategies such as 1031 exchanges for capital gains deferral. With some exceptions, many DST Sponsors include cost segregation or offer investors a path to access such an evaluation as part of their offerings.
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Mastering 1031 Exchanges in Real Estate