Delaware statutory trust as 1031 replacement
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A Delaware statutory trust owns large commercial properties, such as apartment complexes, medical buildings or warehouses, and sells shares of them to investors. A share in a DST counts as replacement property in a 1031 exchange.
That makes DSTs a useful backup when you can't find a property within the 45-day deadline, and a way out of active landlording while still deferring the tax on your gain.
How it works
A Delaware statutory trust (DST) owns large properties in shares. A share counts as replacement property in a 1031 exchange, which helps when you can’t find a property in 45 days or want to stop managing one.
What makes it hold up
- The DST’s offering documents
- The 1031 paperwork through your intermediary
- Your share of income and depreciation each year
Risks
Low on the tax side. The investment side carries fees, little control, and money tied up for years. Open to accredited investors.
Questions to ask your CPA
- How do the fees compare with owning directly?
- Can I exchange out of it later?
Common questions
Who can invest?
DSTs are generally offered only to accredited investors.
How is it different from owning property directly?
You don't manage anything and can't make decisions about the property. In exchange, you get passive income and depreciation from professionally managed real estate.
What are the downsides?
Fees, little control, and money tied up until the trust sells the property, often several years. Compare the fees with owning directly.
Can I exchange out of a DST later?
Yes. When the DST sells its property, you can usually do another 1031 exchange into a new property or another DST.
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Education, not advice. Tax law changes and every situation is different, so confirm the details with your CPA or tax advisor before acting. This page was last checked against tax law as of October 2026, including the 2025 tax law, in October 2026.