Delaware statutory trusts (DSTs) and 1031 exchanges

A Delaware statutory trust (DST) is a trust that holds title to one or more properties and sells fractional beneficial interests to investors. DSTs are popular with property owners who sell a building and want to defer capital gains tax by reinvesting under Section 1031 of the Internal Revenue Code, without managing a replacement property themselves.

Why DSTs qualify for a 1031 exchange

A 1031 exchange lets an owner defer tax on the sale of investment real estate by buying other "like-kind" real estate. In Revenue Ruling 2004-86 the IRS confirmed that an interest in a properly structured DST is treated as a direct interest in real estate for this purpose. Since 2018, Section 1031 applies only to real property.

The deadlines

• 45 days from the sale to identify replacement property in writing.
• 180 days from the sale (or the tax return due date, if earlier) to close on it.
• The sale proceeds must be held by a qualified intermediary, not by the seller.

DST interests can close within days, which is why investors often name one as a backup in case another replacement falls through.

The limits that come with it

To keep its tax treatment, a DST's trustee cannot take on new investors' money after the offering closes, renegotiate existing loans or leases or enter new ones (except in limited cases such as tenant bankruptcy), reinvest sale proceeds, or make more than minor non-structural improvements. This keeps the trust passive, but it means a DST cannot respond to problems the way an ordinary owner could.

What the data shows

420 DST offerings filed a Form D in the last two years. The median U.S. DST states a minimum investment of $100K and has reported $28.0M in sales to 51 investors. Sponsors sell DSTs to accredited investors, often through broker-dealers and registered investment advisers.

Figures are from Form D notices filed with the SEC in the two years to Nov 6, 2026. "Raised" is cumulative sales reported on Form D, not the size or performance of an offering. Funds and programs are grouped by name and by the industry the filer chose, so a few may be misclassified.

Trade-offs

• Fees and load. Selling commissions, offering costs and sponsor fees can take a meaningful share of the money invested at the start.
• No control. Investors cannot vote on management decisions, sales or refinancing.
• Illiquidity. Expect to hold until the sponsor sells, often five to ten years.
• Debt. Many DSTs carry a non-recourse loan; your share of the debt counts toward matching the debt you paid off in the exchange.
• Exit. When the DST sells, you can do another 1031 exchange or pay the deferred tax.

This is general information about how U.S. tax rules commonly apply, not tax or legal advice. Rules change and depend on your situation and the offering's structure; read the offering documents and ask a tax adviser.

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Education, not advice. This guide explains general rules and market practice. It is not legal, tax or investment advice, not an offer or solicitation, and not a recommendation of any fund. Rules change; confirm details with the SEC and a qualified professional. Disclosures