Reference/Frequently Asked Questions
Questions, answered with citations.
The most common questions we receive about Delaware Statutory Trusts, 1031 exchange mechanics, and how 1031 DST Facts operates. Where possible, answers cite the Internal Revenue Code, Treasury Regulations, or the relevant SEC rule.
What is a Delaware Statutory Trust?
A DST is a separate legal entity formed under the Delaware Statutory Trust Act of 1988. For 1031 purposes, the IRS treats a DST beneficial interest as direct ownership of like-kind real property under Section 1031, provided the trust meets the seven prohibitions in Revenue Ruling 2004-86.
Who can invest in a DST?
Only accredited investors as defined in 17 CFR § 230.501(a). Common qualifying paths are the income test ($200k individual or $300k joint, both years), the net-worth test ($1M excluding primary residence), professional certifications (Series 7, 65, 82), entity status, knowledgeable-employee status, or family-office status.
What is the 45-day identification deadline?
The identification period begins on the date the relinquished property closes and ends at midnight on the 45th day thereafter. The IRS does not grant extensions for illness, natural disaster, or closing delays.
What is the 180-day exchange deadline?
The exchange period begins on the date the relinquished property closes and ends at midnight on the earlier of the 180th day thereafter or the due date (including extensions) for the taxpayer's return for the year of sale. The 180-day window runs concurrently with the 45-day window; they do not stack.
What is boot?
Boot is any non-like-kind value received in an exchange (cash, debt relief in excess of new debt, or personal property). Boot is taxable to the extent of gain. To avoid boot, reinvest all net proceeds and acquire replacement property with equal or greater debt.
Why use a DST instead of buying a direct replacement property?
Three common reasons: the 45-day identification clock is too short to find and negotiate a direct replacement; the investor wants to step away from active property management; or the exchange proceeds do not align cleanly with available direct properties and need to be deployed across multiple offerings.
What are the risks of investing in a DST?
Material risks include loss of principal, illiquidity (typical hold 5 to 10 years with no public secondary market), no investor control over property decisions, distributions that are not guaranteed, financing risk, tax risk if the IRS disallows 1031 treatment, conflicts of interest with the sponsor, and concentration in a single asset or market. Read the full PPM before investing.
Is 1031 DST Facts a broker-dealer?
No. 1031 DST Facts is an independent publication, not a broker-dealer, investment adviser, tax advisor, or law firm. We do not sell securities. We do not provide investment, tax, or legal advice. All securities transactions related to any DST offering are handled by registered broker-dealers, not by us.
Can a DST investment be rolled into another 1031 exchange when the trust sells?
Yes, in most cases. When the DST sponsor sells the underlying property, beneficial owners may roll their pro-rata proceeds into another 1031 exchange (including another DST) on the same 45/180-day clock that applies to any other 1031.
What is a 721 UPREIT exchange?
A 721 UPREIT (or 'Section 721 exchange') is a separate Internal Revenue Code provision under which an investor contributes real property to an Operating Partnership of a REIT in exchange for OP units, on a tax-deferred basis. Some DST sponsors offer a planned 721 conversion at the end of the DST hold period, allowing investors to roll into REIT-share liquidity rather than facing another 1031 deadline.
Do you need to be an accredited investor for a 1031 exchange?
No -- a standard 1031 exchange has no accredited-investor requirement. Section 1031 is a tax-code provision, not a securities law, so any owner of qualifying investment real estate can exchange into another property regardless of income or net worth. The accredited requirement applies only when the replacement property is a security, such as a Delaware Statutory Trust (DST) offered under Reg D Rule 506(c). Under SEC Rule 501(a), an individual is generally accredited with $200,000 of income ($300,000 jointly) in each of the two most recent years, or a net worth over $1 million excluding a primary residence, or certain securities licenses. So buying a building yourself needs no accreditation; buying a DST interest does.
What happens if you miss the 45-day identification deadline?
If you miss the 45-day identification deadline, the exchange fails entirely -- there is no extension, grace period, or partial credit. Your qualified intermediary returns the proceeds and the full capital gain becomes taxable in the year of sale. The 45-day and 180-day windows run concurrently from the date the relinquished property closes, and the IRS does not pause them for weekends, holidays, illness, or closing delays. Because the deadline is absolute, many investors identify a DST as a backstop replacement property: because DST interests are pre-assembled and can close in days, they can be identified within the window when a direct-property purchase falls through.
What is the minimum investment for a DST?
The typical minimum investment for a DST is around $100,000 for a 1031 exchange, though minimums vary by sponsor and offering. Because a DST lets multiple accredited investors hold fractional beneficial interests in institutional real estate, the entry point is far below the cost of acquiring a comparable property directly. The minimum, combined with the accredited-investor requirement, reflects that DSTs are securitized private placements rather than publicly traded investments. An investor can also spread 1031 proceeds across multiple DSTs to diversify by property type and sponsor.
Have a question that is not on this list? Send it through the contact page.