Delaware Statutory Trust
A Delaware Statutory Trust (DST) is a business trust created under Delaware law. DSTs can be used in a wide variety of business settings, and have become popular pass-through entities to hold commercial real estate assets for investors.
Upon the sale of a property in a DST, the investor will have the option to pay any capital gains tax or defer any capital gains tax by participating in a 1031 exchange.
Property Exchange: The 1031 Transaction
Section 1031 of the Internal Revenue Code allows an investor to defer the payment of capital gains taxes that may arise from the sale of a business or investment property. By using the proceeds of the sale to purchase “like-kind” real estate, taxes may be deferred, as long as the investor satisfies certain conditions. IPCC offers replacement properties for investors participating in an exchange.
A typical 1031 exchange has three basic steps.
Exchanger sells property, known as the relinquished property, and proceeds are escrowed with a Qualified Intermediary (QI)
Qualified Intermediary, through a written agreement with the investor, transfers funds for purchase of replacement property
Exchanger receives new property (or DST interest)