To defer 100% of your gain, you must replace both equity and debt. Here's where investors slip.
Full 1031 deferral has two requirements that work together: reinvest all of your net equity, and acquire replacement property of equal or greater value — which usually means replacing the debt you paid off, too.
Any shortfall becomes 'boot.' Cash taken out is cash boot; debt you don't replace is mortgage boot. Both are taxable even inside an otherwise valid exchange.
DSTs help here because their non-recourse debt is pre-arranged at the trust level, letting an exchanger match both value and leverage without applying for a new personal loan.
This article is for general educational purposes only and is not investment, tax, or legal advice, or an offer to sell or solicitation to buy any security. DST, Opportunity Zone, and other private placements are speculative, illiquid, and sold only to accredited investors via private placement memorandum. Consult your own CPA and attorney.
