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As a reminder, a Delaware Statutory Trust (DST) is tax-deferred, multiple-owner investment purchased through a 1031 exchange, so at the end of the year each investor receives a pro-rata portion of the DST listing the rental income and expenses. It is considered “pass-through” taxation, which means the profits and losses of the business will pass through to the trust’s individual investors. Each investor will receive a 1099 to report on Schedule E of his/her tax return and for tax reporting purposes, it will be treated the same as any rental income. Keep in mind you will need to file taxes for the state your property is located – unless it is in one of the eight no income tax states such Texas, Alaska, Nevada or Florida, which, as an aside, can be beneficial to investors taxwise.

In a Delaware Statutory Trust, as with any real estate exchange, the potentially remaining depreciation on your tax return is carried over. If you fully depreciated your relinquished property, then the basis will transfer to the new DST property. But, if you still have basis in your relinquished property, or you purchased a higher value in the new DST properties than in the property you sold, you can benefit from the depreciation deductions.

Eventually when your DST goes full cycle, you will be in the position to exchange again and have the option to reenter into another 1031 exchange and purchase a new DST property to continue deferring your capital gains tax. If so, remember you’ll have to purchase a like-kind property or one of equal or greater value or debt as per 1031 exchange rules.

Of course all tax questions should be directed to a CPA who is versed in the ins and outs of 1031 exchanges and DSTs specifically. If you need help finding someone or have more questions about DSTs or other investment opportunities, please give us a call. Our team at Diversified Investment Strategies is a source of highly experienced and trusted professionals specializing in real estate investment and services.

Just this week we heard from two individuals who, unfortunately, came to us too late. They had both completed their exchanges but neither did them correctly – so, therefore, they a created a taxable event. Had they spoken to someone on our team in advance, we may have been able to advise them correctly.

Diversified Investment Strategies represents a team of experienced and trusted professionals specializing in real estate investment and services – including buying, selling, leasing, retirement planning and wealth growth and management through strategic, informed investment choices and a meticulous real estate investment analysis. As knowledgeable replacement property professionals, they help clients build a customized strategy that identifies suitable investments pursuing successful completion of a 1031 Tax-Deferred Exchange. Visit them at or call 866-261-0104.

There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Past performance is not a guarantee of future results.  Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional regarding the specifics of your particular situation. This is not a solicitation or an offer to sell any securities. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney.

Diversified 1031 does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.

Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Diversified 1031 is independent of CIS.