San Francisco | Los Angeles

A 1031 Exchange Replacement Property Solution: Delaware Statutory Trust (DST)

1031 Exchange Process

  • Step 1: Owner (Exchanger) decides to sell investment property & notifies a Qualified Intermediary of exchange prior to the close of the sale.
  • Step 2: Proceeds from the sale are transferred to Qualified Intermediary
  • Step 3: Exchanger identifies replacement property with in 45 days with Qualified Intermediary.
  • Step 4: Qualified intermediary, through a written agreement with the investor, transfers funds for purchase of a DST.
To execute a successful 1031 exchange there are certain guidelines and procedures that must be followed.
How to utilize a DST

A DST can solve for different solutions in a 1031 exchange.

Full replacement of relinquished asset in a timely manner

Delaware Statutory Trusts are a popular solution that can be used to address the changing nature of investment property owner's objectives as they age. A DST investment can be selected and identified before the close of the relinquished asset, simplifying the 1031 exchange process.

Boot

Anything leftover in a 1031 exchange is subject as taxable gain. A DST can solve the tax problem for cash boot or mortgage boot.

Back up/safety net

Don't get sidelined by day 45, a DST has little close risk as the trust holds title and financing terms are set and closed. A DST is a backup to a first choice or a safety net on day 45 of the identification process

Estate plan (swap until you drop)

Simplify the transfer of real estate wealth with fractional ownership of a DST. Your heirs will receive ownership upon death at a step-up in basis.