When investors complete a 1031 exchange into a Delaware Statutory Trust (DST), a common question is whether they can — or should — hold the DST interest through an entity rather than in their own name. The answer is often yes: investors frequently hold DST interests through a single-member LLC for liability protection or through a revocable living trust for estate planning. The key constraint is the 1031 same-taxpayer rule, which requires that the taxpayer who sold the relinquished property be the same taxpayer who acquires the replacement. The good news is that certain entities are 'disregarded' for tax purposes — treated as the same taxpayer — so they preserve the exchange while adding their benefits. A single-member LLC and a revocable living trust are both disregarded entities; an irrevocable trust is more complex and may not be. This guide explains why investors use an LLC or trust, how single-member LLCs and revocable trusts work in a 1031, why irrevocable trusts require care, how to maintain same-taxpayer status, and why you must coordinate with your attorney. Baker 1031 does not provide tax or legal advice — verify the current rules and your specific situation with your attorney and CPA; this is educational information, not investment advice.
Why Use an LLC or Trust
Investors choose to hold a DST interest through an LLC or trust for two main reasons: liability protection and estate planning. A DST interest is fractional, passive real estate, and while the structure itself is designed to be bankruptcy-remote and non-recourse, some investors prefer the additional separation that an entity provides — placing the investment inside a limited liability company so that it sits apart from their other assets and personal exposure. For investors who already hold other real estate or business interests through LLCs, holding a DST the same way keeps their portfolio organized and consistent.
Estate planning is the other major driver. Holding a DST interest through a revocable living trust lets the interest pass to heirs through the trust rather than through probate, which can simplify administration, preserve privacy, and keep the transfer efficient. Because a DST is often held until the underlying property is sold — and because many investors intend to hold until death to capture a step-up in basis — the way the interest is titled matters for how it ultimately passes to the next generation. An entity can make that transfer cleaner.
So investors use an LLC or trust to add liability protection or to plan their estate, layering those benefits onto the DST's passive real estate income. So understanding the motivation frames the structuring choices. Why use an LLC or trust — investors holding a DST interest through a single-member LLC for liability protection (separating the investment from other assets and keeping a portfolio consistent) or through a revocable living trust for estate planning (passing the interest to heirs outside probate, with privacy and efficiency, especially given the intent to hold for a step-up) — reflects two common goals. The entity layers its benefits onto the DST. Understanding the motivation frames the structuring choices. Investors hold DST interests through an LLC for liability protection or through a trust for estate planning, adding those benefits to the DST's passive income.
Single-Member LLCs and 1031
A single-member LLC is the most common entity used to hold a DST interest while preserving a 1031 exchange, because it is a 'disregarded entity' for federal tax purposes. The IRS treats a single-member LLC (one that hasn't elected to be taxed as a corporation) as if it doesn't exist for income-tax purposes — its income, deductions, and ownership flow directly to its single member. That means the LLC and its owner are the same taxpayer in the eyes of the tax code, even though the LLC is a separate legal entity that provides liability protection.
This disregarded status is what makes a single-member LLC compatible with a 1031 exchange. The same-taxpayer rule requires that the taxpayer who sold the relinquished property be the same taxpayer who acquires the replacement property. Because a single-member LLC is disregarded — treated as the same taxpayer as its owner — an investor can hold the relinquished property (or the replacement DST interest) through a single-member LLC without breaking the exchange. The investor gets the liability protection of an LLC while remaining, for tax purposes, the same taxpayer who completed the exchange.
So a single-member LLC adds liability protection without disturbing the 1031, because the tax code disregards it and treats it as the same taxpayer. So it's a natural fit for holding a DST. Single-member LLCs and 1031 — a single-member LLC being a disregarded entity for federal tax (its income and ownership flowing to its single member, so the LLC and owner are the same taxpayer), which makes it compatible with the same-taxpayer rule and lets an investor hold a relinquished property or replacement DST through the LLC without breaking the exchange — combine liability protection with preserved 1031 status. The LLC is separate legally but the same taxpayer for tax. Understanding this explains the natural fit. A single-member LLC is disregarded for tax, so it's treated as the same taxpayer — letting an investor hold a DST with liability protection while preserving the 1031 exchange.
A single-member LLC gives you the best of both worlds in a 1031: the liability protection of a separate legal entity, and — because the tax code disregards it — the same-taxpayer status the exchange requires.
Revocable & Irrevocable Trusts
Trusts come in two broad varieties for this purpose, and they behave very differently in a 1031. A revocable living trust — the kind most people use for estate planning — is generally a 'grantor trust' that is disregarded for income-tax purposes. Because the grantor retains control and can revoke or amend the trust, the tax code treats the trust's assets as still owned by the grantor; the grantor and the trust are the same taxpayer. That means holding a DST interest in a revocable living trust preserves the 1031 exchange while delivering the estate-planning benefit of passing the interest outside probate.
An irrevocable trust is more complex. Once assets are placed in an irrevocable trust, the grantor typically gives up control, and the trust may become a separate taxpayer with its own taxpayer identification number — which can break the same-taxpayer treatment a 1031 requires. Some irrevocable trusts are still structured as grantor trusts (and therefore disregarded), but many are not, and whether a particular irrevocable trust preserves same-taxpayer status depends on its specific terms. Because the consequences of getting this wrong include disqualifying the exchange, irrevocable trusts require careful structuring and professional guidance before a DST interest is titled in them.
So a revocable living trust generally preserves the exchange (it's a disregarded grantor trust), while an irrevocable trust may not — it depends on the terms and demands careful structuring. So the distinction is critical. Revocable and irrevocable trusts — a revocable living trust generally being a disregarded grantor trust (the grantor and trust treated as the same taxpayer, preserving the 1031 while passing the interest outside probate), versus an irrevocable trust being more complex (potentially a separate taxpayer that breaks same-taxpayer treatment, unless specifically structured as a grantor trust) — behave very differently in an exchange. Revocable trusts are usually safe; irrevocable trusts require care. Understanding the distinction is critical. A revocable living trust is a disregarded grantor trust that preserves the 1031; an irrevocable trust may be a separate taxpayer and requires careful structuring to avoid breaking the exchange.
Maintaining Same-Taxpayer Status
The thread running through all of this is the 1031 same-taxpayer rule: the taxpayer who sells the relinquished property must be the same taxpayer who acquires the replacement DST interest. Maintaining same-taxpayer status is what makes entity ownership work — and what can quietly disqualify an exchange if it's mishandled. The practical rule of thumb is that disregarded entities (single-member LLCs and revocable grantor trusts) preserve same-taxpayer status because the tax code looks through them to the underlying owner, while entities that are separate taxpayers generally do not.
Several common situations can create same-taxpayer problems. Adding or changing members of an LLC at the wrong time can convert a disregarded single-member LLC into a partnership (a separate taxpayer). Titling the relinquished property in one form and the replacement in another — for example, selling individually but trying to acquire through a non-disregarded entity — can break the chain. Timing matters too: changes to entity structure are generally best made well before or well after the exchange, not in the middle. Because these pitfalls are technical and fact-specific, they should be reviewed with a qualified intermediary and your tax advisor before the exchange closes.
So maintaining same-taxpayer status means using disregarded entities consistently and avoiding mid-exchange changes that turn an entity into a separate taxpayer. So it's the rule everything else serves. Maintaining same-taxpayer status — the requirement that the same taxpayer who sells the relinquished property acquires the replacement, satisfied by disregarded entities (single-member LLCs, revocable grantor trusts) but threatened by changes that create a separate taxpayer (adding LLC members to form a partnership, mismatched titling, or mid-exchange restructuring) — is the rule that makes entity ownership work or fail. Disregarded entities preserve it; consistency and timing protect it. Understanding it ties the structuring together. Same-taxpayer status is preserved by using disregarded entities consistently and avoiding mid-exchange changes that create a separate taxpayer, which would disqualify the 1031.
- Investors often hold DST interests through an LLC for liability protection or a trust for estate planning.
- A single-member LLC is a disregarded entity — treated as the same taxpayer — so it preserves 1031 same-taxpayer status while adding liability protection.
- A revocable living trust is also disregarded (a grantor trust), preserving the exchange while aiding estate planning; an irrevocable trust may be a separate taxpayer and is more complex.
- Maintaining same-taxpayer status is essential — use disregarded entities consistently and coordinate entity structuring with your attorney before the exchange.
Coordinating With Your Attorney
Because titling a DST interest in an entity sits at the intersection of tax law, estate law, and the mechanics of a 1031 exchange, it's a decision to make with your attorney and CPA — not on your own and not at the last minute. An estate-planning attorney can confirm whether your existing revocable trust is a disregarded grantor trust, whether an LLC is appropriate for your liability concerns, and how the DST interest should fit into your broader estate plan. Getting the titling right the first time avoids costly corrections later.
Timing and coordination with the qualified intermediary matter just as much. The entity that will hold the replacement DST interest should generally be in place and properly titled before the exchange closes, and the same-taxpayer chain should be confirmed in advance — not discovered to be broken afterward, when it may be too late to fix. Your attorney, CPA, and qualified intermediary each see a different part of the picture, so coordinating among them ensures the entity, the exchange, and the estate plan all line up. This is technical, legal work, and the stakes — a disqualified exchange or an unintended tax bill — are high enough to warrant professional guidance.
So coordinating with your attorney (and CPA and qualified intermediary) ensures the entity is correctly structured and titled before the exchange, protecting both the 1031 and the estate plan. So professional guidance is essential here. Coordinating with your attorney — having an estate-planning attorney confirm whether a trust is a disregarded grantor trust and whether an LLC fits, ensuring the holding entity is in place and properly titled before the exchange closes, and coordinating among the attorney, CPA, and qualified intermediary so the entity, exchange, and estate plan align — is essential because this work sits at the intersection of tax, estate, and exchange law. The stakes warrant professional guidance. Understanding this completes the picture. Coordinate entity titling with your attorney, CPA, and qualified intermediary before the exchange closes, so the entity, the 1031, and your estate plan all align and same-taxpayer status holds.
Get the entity in place and properly titled before the exchange closes — a broken same-taxpayer chain discovered afterward may be impossible to fix, so coordinate with your attorney early.
Common Scenarios and How They Play Out
A few recurring scenarios illustrate how entity ownership of a DST plays out in practice. An investor who already holds rental property in a single-member LLC and wants to 1031 into a DST can typically have the LLC complete the exchange and acquire the DST interest — the LLC is disregarded, so the same taxpayer (the member) is on both sides. A married couple selling jointly owned property may acquire the DST jointly or through a jointly owned disregarded entity, keeping the same taxpayers in place; community-property and joint-ownership rules vary by state, which is one more reason to confirm details with an advisor.
Other scenarios are trickier. An investor who wants to add a child as a co-owner of the DST interest is effectively changing the taxpayer — which can't happen mid-exchange without jeopardizing it, though a transfer or gift may be structured separately afterward. An investor selling property held in a multi-member LLC or partnership faces the well-known challenge that the partnership, not the individual partners, is the taxpayer — so partners wanting to go separate ways into different DSTs must address this before the sale (often through a 'drop and swap' or similar planning, which has its own risks). Each of these is fact-specific and benefits from advance planning.
So common scenarios — single-member LLCs, joint ownership, adding heirs, and partnership interests — all turn on keeping the same taxpayer on both sides of the exchange. So advance planning resolves them. Common scenarios and how they play out — an existing single-member LLC completing the exchange (the member is the same taxpayer), joint owners acquiring jointly or through a joint disregarded entity (subject to state rules), adding a child mid-exchange jeopardizing it (better handled separately afterward), and partnership-held property requiring advance planning because the partnership is the taxpayer — all hinge on same-taxpayer continuity. Advance planning resolves them. Understanding these patterns prepares you. Common scenarios from single-member LLCs to joint ownership to partnership interests all turn on keeping the same taxpayer on both sides — which is why advance planning with your advisors matters.
How Baker 1031 Helps You Hold a DST Through an Entity
Baker 1031 Investments helps investors understand how holding a DST interest through an LLC or trust works — why investors use entities for liability protection or estate planning, how single-member LLCs and revocable trusts preserve 1031 same-taxpayer status, why irrevocable trusts are more complex, and how to maintain same-taxpayer status — so you can structure your DST investment to fit your goals while keeping your exchange intact.
DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review. Baker 1031 does not provide tax or legal advice — how you title a DST interest, whether your trust is a disregarded grantor trust, and how the same-taxpayer rule applies to your situation are technical legal and tax questions for your attorney, CPA, and qualified intermediary. We help you understand the structuring options, coordinate with your professional team so the entity is in place and properly titled before the exchange closes, and access suitable DST offerings when appropriate. We're candid that entity structuring is fact-specific and that a mishandled same-taxpayer chain can disqualify an exchange. DST interests are illiquid, carry fees and risk, and their distributions and returns are not guaranteed — projections are not promises, and you should verify the current rules with your professionals. Our role is to help you understand the structure clearly and invest only when suitable for your goals.
Frequently Asked Questions
Can I hold a DST interest in an LLC?
Yes — investors commonly hold DST interests through a single-member LLC, typically for liability protection. A single-member LLC (one that hasn't elected corporate tax treatment) is a 'disregarded entity' for federal income-tax purposes, meaning the IRS looks through it and treats its income and ownership as belonging directly to the single member. Because the LLC and its owner are the same taxpayer for tax purposes, holding a DST interest through a single-member LLC preserves the 1031 same-taxpayer rule while still giving you the liability separation of a distinct legal entity. This makes a single-member LLC a natural and common way to hold a DST acquired in a 1031 exchange. That said, the structuring details — how the LLC is formed, titled, and maintained — matter, and adding members at the wrong time can convert it into a partnership (a separate taxpayer). So confirm the structure with your attorney and CPA before the exchange closes.
Does holding a DST in an LLC affect my 1031 exchange?
It depends on the type of LLC. A single-member LLC is a disregarded entity for federal tax purposes — the IRS treats it as the same taxpayer as its owner — so holding a relinquished property or a replacement DST interest through a single-member LLC generally does not affect the 1031 exchange. The same-taxpayer rule, which requires the taxpayer who sold the relinquished property to be the one who acquires the replacement, is satisfied because the LLC is looked through. A multi-member LLC, however, is generally treated as a partnership, which is a separate taxpayer — so it can complicate or break the same-taxpayer chain if structured incorrectly. The key is consistency and timing: don't change the LLC's membership in a way that alters its tax classification during the exchange. So a single-member LLC typically doesn't affect the exchange, but a multi-member LLC requires careful planning. Confirm your specific structure with your tax advisor and qualified intermediary.
What is a disregarded entity?
A disregarded entity is a business entity that the IRS ignores for federal income-tax purposes, treating its income, deductions, and assets as belonging directly to its owner rather than to the entity itself. The most common example is a single-member LLC that hasn't elected to be taxed as a corporation — for tax purposes, the IRS acts as if the LLC doesn't exist, so the owner reports the LLC's activity on their own return, and the entity and owner are the same taxpayer. A revocable living trust (a grantor trust) is similarly disregarded. This concept matters enormously for 1031 exchanges, because the same-taxpayer rule requires the same taxpayer on both sides of the exchange. Disregarded entities satisfy this rule — you can hold property through them without breaking the chain — while entities that are separate taxpayers (like partnerships or many irrevocable trusts) generally cannot. So a disregarded entity gives you legal separation while preserving same-taxpayer status. Confirm an entity's tax classification with your CPA.
Can I hold a DST in a revocable living trust?
Yes — a revocable living trust is generally a good way to hold a DST interest for estate-planning purposes, and it typically preserves a 1031 exchange. A revocable living trust is usually a 'grantor trust' that is disregarded for income-tax purposes: because the grantor retains control and can revoke or amend the trust, the tax code treats the trust's assets as still owned by the grantor, making the grantor and the trust the same taxpayer. This disregarded status means holding a DST interest in a revocable living trust generally doesn't break the same-taxpayer rule. At the same time, the trust delivers an estate-planning benefit: the DST interest can pass to your heirs through the trust rather than through probate, with greater privacy and efficiency. Given that many investors hold DST interests until death to capture a step-up in basis, titling the interest in a revocable trust can make that transfer cleaner. Confirm your trust's status with your estate-planning attorney.
Can I hold a DST in an irrevocable trust?
You may be able to, but irrevocable trusts are more complex and require careful structuring. Once assets are placed in an irrevocable trust, the grantor typically gives up control, and the trust often becomes a separate taxpayer with its own taxpayer identification number — which can break the same-taxpayer treatment that a 1031 exchange requires. Some irrevocable trusts are still structured as grantor trusts (and therefore remain disregarded for income tax), in which case they may preserve same-taxpayer status, but many are not. Whether a particular irrevocable trust works depends entirely on its specific terms. Because the consequences of getting this wrong include disqualifying the exchange and triggering the capital-gains tax you were trying to defer, this is not a do-it-yourself decision. So if you want to hold a DST in an irrevocable trust, work closely with an estate-planning attorney and your CPA to confirm the trust's tax classification and structure it correctly before the exchange. Baker 1031 doesn't provide tax or legal advice.
What is the same-taxpayer rule in a 1031 exchange?
The same-taxpayer rule requires that the taxpayer who sells the relinquished property in a 1031 exchange be the same taxpayer who acquires the replacement property. The IRS looks at who the taxpayer is — not just the legal title — so the goal is continuity of the tax-reporting entity from one side of the exchange to the other. This is why disregarded entities are so useful: a single-member LLC or a revocable grantor trust is treated as the same taxpayer as its owner, so you can hold property through one without breaking the rule. Conversely, entities that are separate taxpayers — partnerships, multi-member LLCs, and many irrevocable trusts — can violate the rule if used incorrectly. Common pitfalls include adding LLC members mid-exchange (converting it to a partnership), mismatched titling between the relinquished and replacement property, and restructuring during the exchange. So the same-taxpayer rule is the constraint that governs how you can title a DST. Confirm your structure with your qualified intermediary and tax advisor.
Does an LLC give me liability protection for a DST?
Holding a DST interest through a single-member LLC can provide a measure of liability separation, which is one of the main reasons investors use this structure. The LLC is a distinct legal entity, so it can help separate the DST investment from your other personal assets, and for investors who already hold real estate or business interests through LLCs, it keeps the portfolio organized consistently. That said, it's worth understanding what the LLC does and doesn't do. The DST itself is already designed to be bankruptcy-remote and its debt non-recourse to investors, so an investor's personal liability exposure from the underlying property is already limited. The LLC adds another layer of separation, but it isn't a substitute for proper insurance or comprehensive asset-protection planning. So an LLC can add liability protection and organization, but the degree of protection depends on how it's formed and maintained and on your overall plan. Discuss your specific liability concerns with your attorney to confirm the structure fits.
Can a married couple hold a DST together in a 1031?
Yes — a married couple can hold a DST interest jointly in a 1031 exchange, but the structure should match how the relinquished property was held, to keep the same taxpayers on both sides. If the couple sold jointly owned property, they can generally acquire the replacement DST interest jointly, or through a jointly owned disregarded entity, preserving the same-taxpayer chain. Community-property states and joint-tenancy or tenancy-by-the-entirety rules vary, and these state-law differences can affect both the exchange and the eventual step-up in basis at death, so the details matter. The general principle is continuity: the taxpayers who sold should be the taxpayers who acquire. Adding or removing a spouse from title mid-exchange, or switching the form of ownership, can create complications. So a married couple can usually hold a DST jointly, but the titling should mirror the relinquished property and account for state law. Confirm the specifics with your attorney and qualified intermediary before the exchange closes, as these rules are fact-specific.
What happens to a DST in an LLC when I die?
When you die holding a DST interest, the way it passes to your heirs depends on how it's titled, and the tax consequences can be favorable. If you held the DST interest until death, your heirs generally receive a step-up in basis to fair market value, which can eliminate the deferred capital-gains tax that the 1031 exchange had deferred — a powerful 'swap till you drop' benefit. If the interest was held in a single-member LLC, the LLC interest passes according to your estate plan, and the step-up generally still applies to the underlying asset. If it was held in a revocable living trust, the interest passes through the trust outside probate, which can simplify and speed the transfer while preserving the step-up. The interplay of entity structure, the step-up, and estate tax can be technical, so the exact outcome depends on your situation and state law. So titling matters for both the smoothness of the transfer and the tax result. Coordinate with your estate-planning attorney and CPA to confirm how it works for you.
Can I change how a DST is titled after the exchange?
You can generally make titling changes after a 1031 exchange has fully closed, but timing and structure matter, and some changes carry tax consequences. The critical period is during the exchange itself — changing the entity or ownership structure mid-exchange can break the same-taxpayer chain and disqualify the exchange. Once the exchange is complete and the DST interest is held, transferring it into a trust for estate planning, or making certain other changes, may be possible, though some transfers (like gifting a portion to a child) are taxable events or affect the cost basis. Practically, it's better to get the titling right before the exchange closes than to fix it afterward, because some corrections are difficult or impossible. So changes after the exchange are sometimes possible but should be planned carefully, since they can have tax and basis implications. Always coordinate any post-exchange titling change with your attorney and CPA, and understand the consequences before acting. Baker 1031 doesn't provide tax or legal advice.
Why not just hold the DST in my own name?
Holding a DST interest in your own name is perfectly valid and the simplest option — many investors do exactly that. The reasons to use an entity instead come down to two goals. First, liability protection: a single-member LLC adds a layer of legal separation between the DST investment and your other personal assets, which some investors prefer, especially if they already hold real estate through LLCs. Second, estate planning: a revocable living trust lets the interest pass to your heirs outside probate, with greater privacy and efficiency, which matters given that many investors hold DST interests until death to capture a step-up in basis. If neither goal is a priority for you, holding in your own name is fine and avoids the cost and administration of an entity. So the entity isn't required — it's a tool for specific liability or estate-planning objectives. Discuss with your attorney whether those objectives apply to your situation and whether an entity is worth the added complexity for you.
Does using an entity change the DST's income or distributions?
No — using a disregarded entity to hold a DST interest doesn't change the DST's underlying income or distributions, nor how that income is ultimately taxed to you. Because a single-member LLC or revocable grantor trust is disregarded for tax purposes, the IRS looks through it: the DST's distributions flow to the entity and then to you, and you report the income the same way you would if you held the interest directly. The entity is a legal wrapper, not a separate tax layer. What the entity changes is the legal ownership and liability separation, and, for a trust, how the interest passes to heirs — not the economics of the DST itself. The DST's distributions still depend on the property's performance and are not guaranteed. So the entity affects liability and estate planning, not the DST's income or its tax character to you. As always, confirm how the income is reported in your situation with your CPA, since the details can vary.
Can a partnership do a 1031 into a DST?
A partnership itself can complete a 1031 exchange into a DST, because the partnership is the taxpayer that owns the relinquished property and can acquire the replacement. The complication arises when individual partners want to go separate ways — for example, some partners wanting to cash out and others wanting to exchange into different DSTs. Because the partnership, not the individual partners, is the taxpayer, partners can't simply each take their share and do separate exchanges without addressing this structurally. Planning techniques like a 'drop and swap' (distributing property interests to partners before the sale so they hold individually) exist, but they carry their own risks and timing requirements and must be done well in advance. So a partnership can do a 1031 into a DST as a single taxpayer, but partners seeking individual outcomes face real complexity that requires advance planning. This is a technical area where the same-taxpayer rule creates friction, so work closely with your tax advisor and attorney before any sale to structure it correctly.
Do I need an attorney to hold a DST in an entity?
While not strictly required, working with an attorney is strongly advisable when holding a DST interest through an LLC or trust, because the decision sits at the intersection of tax law, estate law, and 1031 exchange mechanics. An estate-planning attorney can confirm whether your existing revocable trust is a disregarded grantor trust, whether an LLC is appropriate for your liability concerns, how the DST interest should fit into your broader estate plan, and how to title everything correctly before the exchange closes. Getting the structure and titling right the first time avoids costly corrections — and avoids the worst outcome, a disqualified exchange that triggers the very tax you were deferring. Your attorney, CPA, and qualified intermediary each see a different part of the picture, so coordinating among them ensures the entity, the exchange, and the estate plan all align. So an attorney's guidance is well worth it for this technical, high-stakes work. Baker 1031 doesn't provide tax or legal advice and coordinates with your professional team rather than replacing it.
How does Baker 1031 help me hold a DST through an entity?
We help investors understand how holding a DST interest through an LLC or trust works — why investors use entities for liability protection or estate planning, how single-member LLCs and revocable trusts preserve 1031 same-taxpayer status, why irrevocable trusts are more complex, and how to maintain same-taxpayer status — so you can structure your DST investment to fit your goals while keeping your exchange intact. DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review. Baker 1031 does not provide tax or legal advice — how you title a DST, whether your trust is disregarded, and how the same-taxpayer rule applies are questions for your attorney, CPA, and qualified intermediary. We help you understand the structuring options, coordinate with your professional team so the entity is in place and properly titled before the exchange closes, and access suitable DST offerings when appropriate. DST interests are illiquid, carry fees and risk, and their distributions and returns are not guaranteed; projections are not promises. Our role is to help you understand the structure clearly and invest only when suitable.
Glossary
- Delaware Statutory Trust (DST)
- A trust holding income-producing real estate as 1031-eligible fractional interests.
- Single-Member LLC
- A one-owner LLC that is disregarded for federal income tax.
- Disregarded Entity
- An entity the IRS ignores for tax, treating it as its owner.
- Revocable Living Trust
- A grantor trust, disregarded for tax, used for estate planning.
- Irrevocable Trust
- A trust the grantor can't revoke, often a separate taxpayer.
- Grantor Trust
- A trust whose assets are still treated as the grantor's for tax.
- Same-Taxpayer Rule
- The 1031 requirement that the same taxpayer sells and buys.
- Liability Protection
- Legal separation of an investment from other personal assets.
- Estate Planning
- Arranging how assets pass to heirs, often via a trust.
- Step-Up in Basis
- Heirs' basis reset to fair market value at the owner's death.
- Probate
- The court process for transferring assets at death.
- Qualified Intermediary
- The party that facilitates a 1031 exchange and holds proceeds.
- Relinquished Property
- The property sold at the start of a 1031 exchange.
- Replacement Property
- The like-kind property acquired in a 1031 exchange.
- Drop and Swap
- Distributing partnership property to partners before an exchange.
- Beneficial Interest
- An investor's fractional ownership stake in a DST.
Sources & References
- IRS. Revenue Ruling 2004-86
- Cornell Legal Information Institute. 26 U.S. Code § 1031 — Exchange of real property held for productive use or investment
- State of Delaware. Delaware Statutory Trust Act (Title 12, Chapter 38)
- IRS. Like-Kind Exchanges — Real Estate Tax Tips
Disclosures
This article is published by Baker 1031 Investments, LLC for general educational purposes for accredited investors and is not an offer to sell or a solicitation of an offer to buy any security, nor is it tax, legal, accounting, or investment advice or a recommendation. Any securities offering is made solely through a sponsor’s private placement memorandum (PPM) following a suitability determination. Securities offered through Aurora Securities, Inc. (ASI), member FINRA / SIPC; Baker 1031 Investments is independent of ASI.
Oil & gas mineral and royalty interests and DST programs are speculative, illiquid securities sold only to verified accredited investors and involve substantial risk, including possible loss of principal, commodity-price and production-decline risk, lack of control, and the risk that an intended 1031 exchange fails to qualify for tax deferral. Whether a particular interest qualifies as like-kind real property is a fact-specific legal determination that varies by state and by the terms of the instrument. Tax results depend on your individual circumstances. Consult your own CPA and attorney before acting. Past performance does not guarantee future results.
