DST WHAT IS A DELAWARE STATUTORY TRUST?A DST is a separate legal entity formed as a trust under Delaware law. When properlystructured, the DST will be classified as a grantor trust for federal income tax purposes and, as aresult, the purchaser of a beneficial interest in the trust will acquire an undivided interest in theasset(s) held by the DST. An investor can use a beneficial interest in a DST as replacementproperty in a 1031 or 1033 exchange.A DST investor must be an “Accredited Investor” which means $1 million of net worth exclusiveof primary home ownership, or $200,000 of income ($300,000 with a spouse).The DST is structured so that each beneficiary (investor) owns a beneficial interest in the trust.The managing Trustee of the DST is either the Sponsor or an affiliate of the Sponsor.The DST holds title to 100% of the interest in the property.Tax reporting is done on a Schedule E utilizing property operating information provided by thesponsor. The IRS issued Revenue Ruling 2004-86 that set forth parameters a DST must meet inorder to be viewed as a grantor trust.BENEFITS OF USING A DST FOR 1031 OR 1033 REPLACEMENT PROPERTYThe DST is the single owner and borrower. Accordingly, the lender only underwrites the DST, noteach individual investor. Therefore, the loan is non-recourse to the investor and not reportableon any personal financial statement.The transfer of a DST ownership interest to an investor can be easier and quicker since there isgenerally less paperwork and due diligence time required as compared with buying a propertydirectly.A typical minimum investment of $100,000 allows more flexibility for investors to 1) diversifyinto several replacement properties and 2) to invest the exact amount needed to complete theexchange.An investment in a DST is a passive investment with professional management in place for theDST and for the property. This relieves the owner/investor of the headaches and responsibilitiesassociated with property management.Many DSTs own large institutional grade properties or a portfolio of properties to reduce riskand provide economies of scale. Different property types are generally available, including netlease with major credit tenants, multifamily, medical office buildings, industrial, other.The DST is sold as a security with several layers of due diligence performed, including third partyreports.Investors can complete a 1031 exchange after the DST property is sold.A DST owner’s estate is likely to benefit from a significant marketability valuation discount.POTENTIAL DRAWBACKS OF DST OWNERSHIP (Includes, but is not limited to:)A DST investment is an investment in real estate; and any real estate investment is subject tomarket value, rental income fluctuations, government regulations and other factors.A DST owner does not have management control over day to day operations.The investment in a DST is illiquid and no public market is likely to exist. While the sponsor mayhave an exit plan, there are no assurances that such plan will be realized. Have A Question About This Topic? Name Email Phone Question Thank you! Oops!