Buying a Delaware Statutory Trust (DST) is more structured than buying a stock or even a piece of direct real estate, because a DST interest is a security and is usually purchased as the replacement property in a 1031 exchange — which means tax deadlines and a qualified intermediary are part of the picture. The good news is that the process follows a clear, repeatable sequence. You confirm your accredited status and open an account with the broker-dealer, you review offerings and read their private placement memoranda, you formally identify your chosen DST with your qualified intermediary inside the 45-day window, your exchange proceeds are wired to fund the investment, and you become a beneficial owner who receives distributions and tax reporting. This guide walks through that roadmap step by step so you know what to expect at each stage. DST interests are securities offered through a broker-dealer to accredited investors after a suitability review; Baker 1031 does not provide tax or legal advice — verify the current rules and deadlines with your tax advisor and qualified intermediary, and treat distributions as projections, not guarantees.
Step 1: Get Accredited & Registered
The process begins before you ever look at a specific property: you confirm your accredited status and open an account with the broker-dealer that offers DST interests. DSTs are securities sold under Regulation D, so they're available only to accredited investors — generally those with income over $200,000 individually (or $300,000 jointly) in each of the last two years with the same expectation this year, or net worth over $1 million excluding their primary residence. Many real estate owners with substantial equity meet these thresholds, so accreditation is far from limited to the ultra-wealthy, but it does have to be confirmed.
Opening an account with the broker-dealer is where the suitability review happens. Your representative gathers information about your financial situation, investment goals, time horizon, liquidity needs, and risk tolerance to determine whether DST investing is appropriate for you, and to begin matching you with offerings that fit. You'll typically complete account-opening paperwork and provide documentation supporting your accredited status. Getting this groundwork done early matters in a 1031 exchange, because once you sell your relinquished property the clock starts — you have 45 days to identify replacement property — so you don't want account setup to be a last-minute scramble. Ideally you start this step before or right around your sale.
So Step 1 is to confirm your accredited status and open an account with the broker-dealer, completing the suitability review that determines whether DSTs fit you. Step 1 — getting accredited and registered by confirming you meet the income or net-worth thresholds for Regulation D offerings and opening an account with the broker-dealer, which triggers the suitability review of your financial situation, goals, liquidity needs, and risk tolerance — is the foundation of buying a DST. Doing it early, before or around your sale, avoids a 45-day scramble. Step 1 establishes that you're eligible and that DSTs are suitable for you, setting up everything that follows in the process.
Step 2: Review Offerings & PPMs
With your account open and suitability established, you move to evaluating available DST offerings. Your representative presents DSTs that fit your goals and exchange parameters — your equity, any debt you need to replace, your property-type and geographic preferences, and your risk tolerance — and you compare them. At any given time there are typically multiple DSTs in the market across different property types (multifamily, net-lease retail, industrial, medical office, self-storage) and different sponsors, debt levels, and projected distributions, so you have choices.
For each offering you're seriously considering, you read the Private Placement Memorandum (PPM) — the central offering document that discloses the property, the sponsor, the structure, the debt, the fees, the projected returns, and, critically, the risk factors. This is where the due diligence happens: you vet the sponsor's track record and full-cycle history, analyze the property and its tenants and leases, review the loan-to-value and maturity of any debt, read the risk factors carefully, and confirm the fees. Comparing offerings on these fundamentals — rather than on headline yield alone — is how you choose well. Many investors plan to diversify across two or more DSTs, which you can structure at this stage given DSTs' relatively low minimums.
So Step 2 is to review available DST offerings and read their PPMs, doing the due diligence that lets you compare deals on substance and select the right one (or ones). Step 2 — reviewing offerings and PPMs by comparing the DSTs your representative presents against your exchange parameters and goals, then reading each serious candidate's PPM to vet the sponsor, analyze the property and tenants, review the debt, study the risk factors, and confirm the fees — is the due diligence heart of the process. Comparing on fundamentals, not just yield, and considering diversification across multiple DSTs, leads to better selection. Step 2 turns eligibility into an informed choice, setting up the formal identification that comes next.
The PPM is where buying a DST becomes a decision rather than a purchase — read the risk factors as carefully as the projected yield, because both are part of the same offering.
Step 3: Identify the DST With Your QI
Because a DST is almost always bought as replacement property in a 1031 exchange, Step 3 is governed by the exchange rules — and the most important is the 45-day identification deadline. Within 45 calendar days of selling your relinquished property, you must formally identify your replacement property in writing and deliver that identification to your qualified intermediary (QI), the independent party holding your exchange proceeds. Identifying the DST means specifying it in your written identification notice, following the IRS identification rules (such as the three-property rule or the 200% rule that limit how many properties, or how much value, you can identify).
This step is where the broker-dealer side and the exchange side connect. You've chosen your DST (or DSTs) in Step 2; now you put that choice into the formal written identification and get it to your QI before the 45-day clock runs out. DSTs are particularly well suited to this deadline because they're pre-packaged and can close quickly — there's no negotiation, financing contingency, or closing delay the way there would be with a direct property purchase, which removes a major source of 45-day stress. Still, the deadline is strict and not extendable except in narrow disaster-relief situations, so timing matters. Coordinate closely with your QI and your representative to ensure the identification is correct and timely.
So Step 3 is to formally identify your chosen DST in writing to your qualified intermediary within the 45-day window, following the IRS identification rules. Step 3 — identifying the DST with your QI by putting your chosen offering into a written identification notice that follows the IRS rules (such as the three-property or 200% rule) and delivering it to your qualified intermediary within 45 days of your sale — is the formal exchange step that locks in your replacement property. DSTs' fast, contingency-free closing makes them well suited to this deadline. Step 3 connects your investment choice to the exchange's strict timeline, setting up the funding that completes the purchase.
Step 4: Fund the Investment
With the DST identified, Step 4 is funding — moving your exchange proceeds into the trust. In a 1031 exchange, you never take possession of the sale proceeds (doing so would trigger tax); instead, your qualified intermediary holds them and, when you're ready to acquire the DST interest, wires the funds directly to the DST on your behalf. You complete the DST's subscription documents (the paperwork that makes you a beneficial owner), and the QI's wire funds your purchase. This must happen within the overall 180-day exchange period — the deadline by which you must close on your replacement property to complete the exchange.
Because a DST is pre-assembled and doesn't require you to obtain financing or negotiate a closing, funding is typically fast and straightforward once the identification is in place — another reason DSTs help investors meet exchange deadlines. If you're replacing debt from your relinquished property, the DST's existing non-recourse, trust-level loan provides that debt replacement automatically, without you personally qualifying for or guaranteeing a new loan. You'll fund your equity portion, and the trust's debt covers the leverage side of your exchange. Confirm with your QI and representative exactly how much to invest to satisfy your exchange requirements (replacing both equity and debt to fully defer gain), and ensure the wire and subscription are completed within the 180-day window.
So Step 4 is to complete the subscription documents and have your QI wire the exchange proceeds to fund the DST within the 180-day period. Step 4 — funding the investment by signing the DST's subscription documents and having your qualified intermediary wire your held exchange proceeds directly to the trust within the 180-day exchange period, with the DST's existing trust-level debt providing any debt replacement automatically — completes the purchase mechanics. DSTs' contingency-free funding is typically fast, helping you meet the deadline, and you never touch the proceeds yourself. Step 4 moves your capital into the trust, setting up the final step where you become a beneficial owner and begin receiving distributions.
- Step 1: Confirm your accredited status and open an account with the broker-dealer, completing the suitability review — ideally before your sale.
- Step 2: Review available DST offerings and read each PPM, doing due diligence on the sponsor, property, debt, risk factors, and fees.
- Step 3: Identify your chosen DST in writing to your qualified intermediary within the 45-day window, following the IRS identification rules.
- Step 4 and 5: Have your QI wire exchange proceeds to fund the DST within 180 days, then receive your beneficial interest, distributions, and tax reporting.
Step 5: Receive Your Beneficial Interest
Once the funding is complete, Step 5 is the payoff: you become a beneficial owner of the DST. Your subscription is accepted, and you receive a fractional beneficial interest in the trust that holds the real estate — which, under IRS Revenue Ruling 2004-86, is treated as a direct interest in like-kind real property for 1031 purposes, completing your exchange and deferring your capital-gains tax. From this point, you're a passive owner: the sponsor and trustee manage the property, and you simply hold your interest and receive your share of the trust's cash flow.
As a beneficial owner you begin receiving distributions, typically paid monthly, representing your share of the property's net rental income (these are projections, not guarantees, and can vary with the property's performance). You'll also receive periodic reporting on the property and, each year, the tax documents you need — generally a substitute Form 1099 reflecting your share of the trust's income and a grantor-trust statement, rather than a K-1, because a DST is a grantor trust for tax purposes. You'll continue to claim your share of depreciation, which can shelter part of your distributions. You then hold the interest passively until the sponsor sells the property at full cycle (commonly after five to seven or more years), at which point you can take the proceeds or exchange again.
So Step 5 is to receive your beneficial interest and become a passive owner who collects distributions and tax reporting until the DST goes full cycle. Step 5 — receiving your beneficial interest, which the IRS treats as like-kind real property completing your 1031 exchange, and then holding it passively while receiving monthly distributions (projections, not guarantees), periodic property reporting, and annual tax documents (a substitute 1099 and grantor-trust statement, not a K-1), including your share of depreciation — is where the purchase becomes an ongoing investment. You hold until the sponsor sells at full cycle. Step 5 completes the buying process and begins your tenure as a passive DST owner, with the exchange's tax deferral secured.
When your subscription is accepted, you're not just an investor in a fund — you hold a fractional interest in real property that the IRS treats as like-kind, completing your exchange and deferring your gain.
Timeline and Coordination
Seeing the five steps in sequence highlights how much the process depends on timing and coordination among the parties. The 1031 exchange deadlines anchor everything: 45 days from your sale to identify replacement property, and 180 days total to close. Because Steps 1 and 2 — getting accredited and registered, and reviewing offerings — take time, the most successful DST exchanges begin before or right around the sale of the relinquished property, not after the clock has started. Getting your account open and your due diligence underway early gives you room to choose well rather than settle under deadline pressure.
Coordination among the players is the other key. The qualified intermediary holds your proceeds and receives your identification and funding instructions; the broker-dealer and your representative handle the offerings, suitability, and subscription; the sponsor manages the DST; and your CPA and attorney handle your specific tax and legal questions. These parties work together, but you (with your representative's help) keep the timeline on track. DSTs' pre-packaged, contingency-free nature makes them uniquely able to close quickly within the window — one of the reasons they're so often used to rescue exchanges where a primary property fell through near the deadline. Still, none of the deadlines are forgiving, so plan ahead and confirm each step with your QI and representative.
So the timeline and coordination tie the five steps together — starting early, respecting the 45- and 180-day deadlines, and coordinating among the QI, broker-dealer, sponsor, and your advisors. Timeline and coordination — recognizing that the 45-day identification and 180-day closing deadlines anchor the process, that Steps 1 and 2 are best begun before or around the sale to avoid a scramble, and that the QI, broker-dealer and representative, sponsor, and your CPA and attorney must coordinate while you keep the timeline on track — are what make a DST purchase go smoothly. DSTs' fast closing helps, but the deadlines are strict. Timeline and coordination frame the whole step-by-step process, turning five discrete steps into one well-managed exchange.
How Baker 1031 Helps You Buy a DST
Baker 1031 Investments helps investors buy DSTs step by step — getting accredited and registered, reviewing offerings and PPMs, identifying the DST with your qualified intermediary, funding the investment, and receiving your beneficial interest — coordinating the process so your exchange stays on track through the 45- and 180-day deadlines.
DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review of your financial situation, goals, liquidity needs, and risk tolerance. We help you confirm your accredited status and open an account, present and compare offerings that fit your exchange parameters, work through each PPM and its risk factors, coordinate with your qualified intermediary on the written identification within the 45-day window, complete the subscription and funding so your QI wires proceeds within the 180-day period, and confirm you've replaced both equity and debt to fully defer your gain — including using a DST's trust-level non-recourse debt for debt replacement without you personally qualifying. We also help you diversify across multiple DSTs where appropriate. Baker 1031 does not provide tax or legal advice; your CPA, attorney, and qualified intermediary handle your specific tax situation and exchange mechanics, which can be technical. We're candid that DSTs are illiquid and that distributions are projections, not guarantees — neither yields nor returns are promised, and past performance doesn't guarantee future results. Our role is to guide you through the process and invest only when a DST is suitable for you.
Frequently Asked Questions
How do I buy a DST?
Buying a DST follows a clear five-step sequence, because a DST interest is a security usually purchased as replacement property in a 1031 exchange. Step 1: get accredited and registered — confirm you meet the income or net-worth thresholds for Regulation D offerings and open an account with the broker-dealer, completing a suitability review. Step 2: review offerings and read each PPM, doing due diligence on the sponsor, property, debt, risk factors, and fees. Step 3: identify your chosen DST in writing to your qualified intermediary within the 45-day window, following the IRS identification rules. Step 4: fund the investment — sign the subscription documents and have your QI wire your held exchange proceeds to the trust within the 180-day period. Step 5: receive your beneficial interest and become a passive owner collecting distributions and tax reporting. So buying a DST is a structured process anchored by the exchange deadlines, and your representative and QI help you keep it on track.
Do I need to be an accredited investor to buy a DST?
Yes — DST interests are securities offered under Regulation D, so they're generally available only to accredited investors. To qualify, you typically need income over $200,000 individually (or $300,000 jointly) in each of the last two years with the same expectation this year, or a net worth over $1 million excluding your primary residence. The good news is that many real estate owners with substantial equity already meet these thresholds, so accreditation is far from limited to the ultra-wealthy — if you're selling an appreciated investment property, you may well qualify on net worth alone. Confirming your accredited status, with supporting documentation, is part of opening your account with the broker-dealer in Step 1. So you do need to be accredited to buy a DST, but the requirement is met by a broad range of property owners. Your representative can help you confirm whether you qualify before you proceed with an exchange into a DST.
What is a qualified intermediary and why do I need one?
A qualified intermediary (QI) is an independent third party that facilitates a 1031 exchange by holding your sale proceeds and handling the documentation, so that you never take actual or constructive possession of the funds. This is essential because if you received the proceeds yourself, even briefly, the IRS would treat the sale as taxable and you'd lose the deferral. In a DST purchase, the QI holds your exchange proceeds after you sell your relinquished property, receives your written identification of the DST within the 45-day window, and then wires the funds directly to the trust to fund your purchase within the 180-day period. You must engage a QI before you close on the sale of your relinquished property — you can't add one after the fact. So a QI is a required, independent party that makes the exchange work by keeping the proceeds out of your hands and moving them into the DST on your behalf. Your representative can coordinate with your QI throughout the process.
What is the 45-day rule when buying a DST?
The 45-day rule is a strict 1031 exchange deadline: within 45 calendar days of selling your relinquished property, you must formally identify your replacement property in writing and deliver that identification to your qualified intermediary. When buying a DST, identifying it means specifying it in your written identification notice, following the IRS identification rules — such as the three-property rule (identify up to three properties regardless of value) or the 200% rule (identify any number as long as their combined value doesn't exceed 200% of what you sold). The 45 days are calendar days, including weekends and holidays, and the deadline is not extendable except in narrow disaster-relief situations. DSTs are particularly well suited to this deadline because they're pre-packaged and close quickly, with no financing or negotiation delays. So the 45-day rule sets the window for formally choosing your DST, and meeting it — by starting your account-opening and due diligence early — is critical to a successful exchange. Coordinate closely with your QI on timing.
How long does it take to buy a DST?
The actual purchase of a DST can be quite fast — once you've chosen an offering and identified it, funding can often be completed within days, because a DST is pre-assembled and requires no financing, negotiation, or closing process the way a direct property purchase does. What takes longer is the preparation: confirming accreditation and opening your account (Step 1) and reviewing offerings and doing due diligence (Step 2). These are best started before or right around the sale of your relinquished property, so you're not rushing under the 45-day deadline. The overall process is bounded by the 1031 timeline: 45 days from your sale to identify, and 180 days to close and fund. Within that window, the DST mechanics themselves are quick. So while the exchange spans up to 180 days, buying the DST itself is fast once you've prepared and chosen — which is exactly why DSTs are often used to rescue exchanges where a primary property fell through near the deadline. Start early to give yourself room.
What is a PPM and why do I read it before buying?
A PPM — Private Placement Memorandum — is the central offering document for a DST, and reading it is the due diligence heart of Step 2. It discloses the property, the sponsor, the trust structure, the debt, the fees, the projected returns, and, critically, the risk factors — the section detailing everything that could go wrong, including that distributions are projections rather than guarantees, that the investment is illiquid, that you have no control over management, and that you could lose principal. Reading the PPM lets you vet the sponsor's track record and full-cycle history, analyze the property and its tenants and leases, review the loan-to-value and maturity of any debt, understand the fees and the load, and weigh whether the projected return compensates you for the disclosed risks. Comparing offerings on these fundamentals — not on headline yield alone — is how you choose well. So you read the PPM before buying because it turns an attractive pitch into a clear-eyed understanding of the investment and its risks. Ask questions about anything unclear.
Do I take possession of my exchange funds when buying a DST?
No — and this is critical to preserving your tax deferral. In a 1031 exchange, you must never take actual or constructive possession of your sale proceeds; if you did, even briefly, the IRS would treat the sale as a taxable event and you'd lose the deferral. Instead, your qualified intermediary holds the proceeds from the moment you sell your relinquished property. When you're ready to fund the DST, the QI wires the funds directly to the trust on your behalf — the money goes from the QI to the DST without ever passing through your hands. You complete the DST's subscription documents to become a beneficial owner, and the QI's wire funds the purchase. This must happen within the 180-day exchange period. So you never touch your exchange funds when buying a DST; the qualified intermediary moves them directly into the trust, which is exactly what keeps the exchange valid and your gain deferred. Coordinate the wire and subscription timing with your QI and representative.
How does debt replacement work when buying a DST?
Debt replacement works automatically through the DST's existing trust-level loan, which is one of the most useful features of buying a DST in a 1031 exchange. To fully defer your gain, you generally must replace both the equity and the debt from your relinquished property — so if you sold a property with a mortgage, you typically need to take on a similar amount of debt on the replacement. With a direct purchase, that means personally qualifying for and guaranteeing a new loan. With a leveraged DST, the trust already holds a non-recourse loan at the trust level, and your fractional beneficial interest includes a proportionate share of that debt — so you get the debt replacement without personally qualifying for, applying for, or guaranteeing any loan. This is especially valuable for investors who might not easily qualify for new financing. So a leveraged DST provides debt replacement automatically and passively. If your relinquished property had little or no debt, an all-cash DST may suit you instead. Your representative can help match the DST's leverage to your exchange's debt-replacement needs.
What do I receive after buying a DST?
After your subscription is accepted and the funding completes, you receive a fractional beneficial interest in the DST — which, under IRS Revenue Ruling 2004-86, is treated as a direct interest in like-kind real property for 1031 purposes, completing your exchange and deferring your gain. From then on, you're a passive owner. You begin receiving distributions, typically paid monthly, representing your share of the property's net rental income (these are projections, not guarantees, and can vary with performance). You receive periodic reporting on the property's operations. And each year you receive the tax documents you need — generally a substitute Form 1099 reflecting your share of the trust's income and a grantor-trust statement, rather than a K-1, because a DST is a grantor trust for tax purposes — along with your share of depreciation, which can shelter part of your distributions. You hold the interest passively until the sponsor sells at full cycle. So after buying, you receive a like-kind beneficial interest, ongoing distributions, property reporting, and annual tax documents.
Does a DST issue a K-1 or a 1099?
A DST generally issues a substitute Form 1099 and a grantor-trust statement, not a Schedule K-1. This is because a DST is structured as a grantor trust for tax purposes, which means each beneficial owner is treated as owning a direct, proportionate share of the underlying real estate and its income — so you report your share of the trust's rental income, expenses, and depreciation directly, much as you would for property you owned outright. By contrast, a partnership (such as an LLC taxed as a partnership) issues K-1s to its partners. The grantor-trust treatment is part of what makes a DST interest qualify as like-kind real property for a 1031 exchange. For you, it means simpler, more familiar real estate tax reporting and the ability to claim your share of depreciation to shelter part of your distributions. So expect a 1099 and grantor-trust statement, not a K-1. Your CPA handles the specifics of reporting your DST income, since Baker 1031 does not provide tax advice; confirm the current treatment with your tax advisor.
Can I diversify across multiple DSTs in one exchange?
Yes — you can diversify your exchange across multiple DSTs, and many investors do. Because DSTs have relatively low minimums (often around $25,000 to $100,000), you can split your exchange proceeds among several trusts rather than concentrating everything in one. Diversifying by sponsor, property type, and geography reduces the impact of any single weak assumption, underperforming tenant, or difficult market, which is a sensible way to manage the risk inherent in any one offering. You'd identify each DST in your written identification to your qualified intermediary, following the IRS identification rules (such as the three-property rule or the 200% rule, which limit how many properties or how much value you can identify). Diversification does mean more due diligence — more sponsors to vet and more PPMs to read — so it's a balance. So you can and often should diversify across multiple DSTs in a single exchange, subject to the identification rules. Your representative can help structure an allocation that fits your exchange size, goals, and the deadlines.
What happens if I can't fund within 180 days?
The 180-day deadline is strict: you must close on and fund your replacement property within 180 calendar days of selling your relinquished property to complete the exchange. If you fail to fund within that window, the exchange fails, and your sale generally becomes a taxable event — you'd owe capital-gains tax (and any depreciation recapture) on the gain you were trying to defer. The 180 days run concurrently with the 45-day identification period (they don't add together), and the deadline is not extendable except in narrow disaster-relief situations. This is one reason DSTs are so useful: because they're pre-packaged and close quickly with no financing contingencies, funding a DST within the window is straightforward, which helps investors avoid blowing the deadline — especially when a primary replacement property falls through late. Still, you must plan ahead and coordinate with your qualified intermediary to ensure the wire and subscription complete in time. So missing 180 days means losing the deferral; DSTs' fast funding helps you meet it, but the deadline is firm.
Is buying a DST risky?
Yes — buying a DST involves real investment risk, which is disclosed throughout the PPM and which you should understand before you invest. DSTs are illiquid: there's no real secondary market, so you generally can't sell early and are committed until the sponsor sells at full cycle (commonly five to seven or more years). You have no control: the sponsor and trustee make all decisions. Distributions are projections, not guarantees, and can be reduced or suspended if property income falls. The underlying real estate can lose value, tenants can default, leverage can amplify losses, and debt can be hard to refinance at maturity. Fees and the upfront load reduce your net return. Due diligence — vetting the sponsor, analyzing the property, reviewing the debt, and reading the risk factors — reduces these risks but cannot eliminate them. So buying a DST is not risk-free; it's a long-term, illiquid investment that can lose value, including principal. Make sure it's suitable for your situation and risk tolerance, and consider diversifying across multiple DSTs.
What is the minimum investment to buy a DST?
DST minimums are relatively accessible, often around $25,000 to $100,000, which is far below the cost of buying most replacement properties outright. The exact minimum varies by offering and sponsor — some set it at $25,000 for cash investors and a bit higher for 1031 exchange investors. These low minimums are part of what makes DSTs practical for diversification: rather than placing an entire exchange in one property, you can split your proceeds across several DSTs by sponsor, property type, and geography to spread your risk. In an exchange, the amount you actually invest is usually driven less by the minimum and more by your exchange requirements — you generally need to reinvest all of your equity (and replace your debt) to fully defer your gain, so the size of your relinquished-property sale shapes how much you place. The real gating factor isn't the minimum but the accreditation requirement, since DST interests are securities limited to accredited investors. So the minimums keep entry reasonable; your representative can help size your investment to satisfy both the minimum and your exchange's full-deferral needs.
How does Baker 1031 help me buy a DST?
We help investors buy DSTs step by step — getting accredited and registered, reviewing offerings and PPMs, identifying the DST with your qualified intermediary, funding the investment, and receiving your beneficial interest — coordinating the process so your exchange stays on track through the 45- and 180-day deadlines. DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review of your financial situation, goals, liquidity needs, and risk tolerance. We help you confirm accreditation and open an account, compare offerings that fit your exchange, work through each PPM and its risk factors, coordinate with your QI on the written identification, complete the subscription and funding, confirm you've replaced both equity and debt, and diversify across multiple DSTs where appropriate. Baker 1031 does not provide tax or legal advice; your CPA, attorney, and QI handle your specific tax situation and exchange mechanics. We're candid that DSTs are illiquid and that distributions are projections — neither yields nor returns are promised, and past performance doesn't guarantee future results.
Glossary
- Delaware Statutory Trust (DST)
- A trust holding income-producing real estate, with 1031-eligible beneficial interests.
- Beneficial Interest
- A fractional ownership share in a DST, treated as like-kind real property.
- 1031 Exchange
- A tax-deferred swap of like-kind investment real property.
- Accredited Investor
- An investor meeting income or net-worth thresholds for Reg D offerings.
- Qualified Intermediary (QI)
- The independent party that holds exchange proceeds and facilitates the swap.
- 45-Day Rule
- The deadline to identify replacement property after a sale.
- 180-Day Rule
- The deadline to close on and fund the replacement property.
- Identification Notice
- The written designation of replacement property given to the QI.
- Three-Property Rule
- An identification rule allowing up to three properties of any value.
- 200% Rule
- An identification rule capping total identified value at 200%.
- PPM
- Private Placement Memorandum — the DST's central offering document.
- Subscription Documents
- The paperwork that makes you a beneficial owner of a DST.
- Debt Replacement
- Replacing relinquished-property debt via the DST's trust-level loan.
- Grantor Trust
- The tax status under which a DST issues a 1099, not a K-1.
- Distribution
- Your share of the DST's net rental income (a projection).
- Full Cycle
- When the sponsor sells the DST property, ending the investment.
Sources & References
- IRS. Revenue Ruling 2004-86 (Delaware Statutory Trusts)
- IRS. Like-Kind Exchanges — Real Estate Tax Tips
- Cornell Legal Information Institute. 26 CFR § 1.1031(k)-1 — Treatment of deferred exchanges
- U.S. Securities and Exchange Commission. Investor.gov — Updated Investor Bulletin: Accredited Investors
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.
