Comprehensive Guide to DSTs - Delaware Statutory Trust

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DST Strategy – Complete your 1031 Exchange through a DST for passive ownership in institutional-grade real estate.

QOZ Opportunity – Defer or eliminate capital gains by reinvesting through a Qualified Opportunity Zone fund.

Energy Investment – Explore oil, gas, and mineral rights strategies designed for current income and significant tax advantages.

Marketplace Inquiry – Talk through a specific property you’re considering or get strategy guidance on a current offering.

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Directory:

CHAPTER 01 What Is A Delaware Statutory Trust?

CHAPTER 02 The History and Legal Foundations of the DST

CHAPTER 03 How DSTs Work Within a 1031 Exchange

CHAPTER 04 The IRS Rules Governing DSTs

CHAPTER 05 The Tax Benefits of DST Investing

CHAPTER 06 Beyond Taxes: The Other Benefits of DSTs

CHAPTER 07 Who Should Consider A DST?

CHAPTER 08 Understanding the Risks and Considerations of a DST

CHAPTER 09 Types of DST Properties and Asset Classes

CHAPTER 10 The Parties to a DST Investment

CHAPTER 11 A Step-by-Step Guide to Investing in a DST

CHAPTER 12 DST Exit Strategies: When The Trust Sells

CHAPTER 13 The 721 Exchange and the UPREIT

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Step 1 of 3 – What Brings You Here Today?

Select your service*

I’M ON A DEADLINE! – The 45-day clock is ticking. Get help identifying replacement options now.

DST Strategy – Complete your 1031 Exchange through a DST for passive ownership in institutional-grade real estate.

QOZ Opportunity – Defer or eliminate capital gains by reinvesting through a Qualified Opportunity Zone fund.

Energy Investment – Explore oil, gas, and mineral rights strategies designed for current income and significant tax advantages.

Marketplace Inquiry – Talk through a specific property you’re considering or get strategy guidance on a current offering.

Not Sure Yet – I’d like Daniel’s expert guidance on which path fits my situation.

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The Tax Benefits of DST Investing

We’ve now covered the price of admission: the strict rules a DST must follow to keep its favorable status. This chapter is about what investors get in return. And it’s a great deal.

The tax advantages of a Delaware Statutory Trust fall into three broad categories that build on one another. The first defers taxes today. The second shelters income along the way. And the third, the one too many investors never learn about, can erase the tax bill entirely for the next generation.

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Benefit No. 1: Deferring Capital Gains Today

The most immediate benefit, and the one that brings most investors to a DST in the first place, is the deferral of capital gains taxes.

When you sell appreciated investment real estate outright, the IRS takes its share… and between federal capital gains tax, the 3.8% net investment income tax, depreciation recapture (taxed at up to 25%), and state taxes, that share can swallow 30% or more of your hard-earned equity in a single stroke.

By exchanging into a DST instead, you defer that entire liability, keeping every dollar of your equity invested and working for you rather than handing a large piece of it to the Treasury.

This is simply the 1031 exchange benefit we explored earlier, delivered through the DST structure. What makes the DST version so appealing is that it captures this deferral while freeing you from the active management that direct ownership demands: the “tenants, toilets, and trash” of active ownership.

Benefit No. 2: Sheltering Your Income With Depreciation

The benefits don’t stop once you’re invested. Real estate enjoys one of the most valuable write-offs in the tax code — depreciation — and DST investors receive their share of it.

Because a properly structured DST is treated as a grantor trust, its income and deductions flow through directly to the investors. Each year, rather than a partnership’s Schedule K-1, you receive a grantor trust letter reporting your proportionate share of the property’s income and expenses, which you report on your own return. Crucially, that includes depreciation. This paper deduction — reflecting the theoretical wear and tear of the building over time, even as it may be appreciating in value — can shelter a meaningful portion of the distributions you receive, so that the income landing in your pocket is often taxed at a far lower rate than ordinary income would be. It’s a quieter benefit than the headline deferral, but over a multi-year hold it adds up.

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Step 1 of 3 – Step 1 of 3 – What Brings You Here Today?

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Step 1 of 3 – What Brings You Here Today?

Select your service*

I’M ON A DEADLINE! – The 45-day clock is ticking. Get help identifying replacement options now.

DST Strategy – Complete your 1031 Exchange through a DST for passive ownership in institutional-grade real estate.

QOZ Opportunity – Defer or eliminate capital gains by reinvesting through a Qualified Opportunity Zone fund.

Energy Investment – Explore oil, gas, and mineral rights strategies designed for current income and significant tax advantages.

Marketplace Inquiry – Talk through a specific property you’re considering or get strategy guidance on a current offering.

Not Sure Yet – I’d like Daniel’s expert guidance on which path fits my situation.

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How To Build Tax-Free Wealth Using A Delaware Statutory Trust by Daniel Goodwin

Benefit No. 3: The Grand Finale — A Step-Up at Death

Here is where the strategy becomes something more than tax deferral, and where the DST does something your will alone cannot.

Deferral, by itself, is a loan from the government, not a gift; if you sell the DST outright someday, the deferred gain comes due.

But there’s an elegant off-ramp. When an investor dies holding an appreciated asset, that asset passes to heirs at a stepped-up cost basis: the IRS resets the taxable basis to the property’s fair market value as of the date of death. Every dollar of appreciation and every dollar of gain deferred over a lifetime of exchanges is wiped clean. Heirs can sell shortly thereafter and owe little or no capital gains tax… and the depreciation recapture that would otherwise be waiting evaporates as well.

This is the logic behind the strategy sometimes called “swap till you drop.” An investor chains 1031 exchanges across decades, into and out of DSTs and other properties… deferring the tax at every step. The gains snowball, entirely untaxed, and the potential savings can run well into the hundreds of thousands or even millions of dollars. Then, at death, the step-up erases the accumulated liability altogether. The government’s “loan” is, in effect, forgiven.

DSTs carry a particular estate-planning advantage here that physical real estate can’t match. A single building can’t be split cleanly among three children without a sale or an awkward co-ownership arrangement. A DST interest, by contrast, is divisible: an investor can leave precise percentages to each heir, dividing the wealth neatly and sparing the next generation both the tax bill and the burden of managing property they may have no interest in running. I explore these estate-planning strategies at length in my book, How to Build Tax-Free Wealth Using a Delaware Statutory Trust.

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Step 1 of 3 – Step 1 of 3 – What Brings You Here Today?

33%

Step 1 of 3 – What Brings You Here Today?

Select your service*

I’M ON A DEADLINE! – The 45-day clock is ticking. Get help identifying replacement options now.

DST Strategy – Complete your 1031 Exchange through a DST for passive ownership in institutional-grade real estate.

QOZ Opportunity – Defer or eliminate capital gains by reinvesting through a Qualified Opportunity Zone fund.

Energy Investment – Explore oil, gas, and mineral rights strategies designed for current income and significant tax advantages.

Marketplace Inquiry – Talk through a specific property you’re considering or get strategy guidance on a current offering.

Not Sure Yet – I’d like Daniel’s expert guidance on which path fits my situation.

Step 2 of 3 – Schedule Your Call

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Pick a Time*

Schedule

Step 3 of 3 – Your Information

First Name*

Last Name*

Phone*

Email*

Where are you in the 45-day window*

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I am an Accredited Investor

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I agree to all Provident 1031 Terms & Conditions

A Necessary Word of Caution

These benefits are real, but they are also technical and depend entirely on following the rules precisely and on your specific circumstances. Tax law changes, states treat these transactions differently, and no guide can substitute for advice tailored to your situation. Nothing here is legal or tax advice; before acting, you should consult a qualified tax professional and a knowledgeable advisor who can evaluate your particular facts.

With the rewards and their requirements now on the table, we can look beyond taxes altogether… because for many DST investors, some of the most compelling advantages have nothing to do with the IRS at all. That’s where we turn next.

Previous Opportunity

The IRS Rules Governing DSTs

Next Opportunity

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Directory:

Step 1 of 3 – What Brings You Here Today?

Step 2 of 3 – Schedule Your Call

Step 3 of 3 – Your Information

The Tax Benefits of DST Investing

Benefit No. 1: Deferring Capital Gains Today

Benefit No. 2: Sheltering Your Income With Depreciation

Step 1 of 3 – What Brings You Here Today?

Step 2 of 3 – Schedule Your Call

Step 3 of 3 – Your Information

Benefit No. 3: The Grand Finale — A Step-Up at Death

Step 1 of 3 – What Brings You Here Today?

Step 2 of 3 – Schedule Your Call

Step 3 of 3 – Your Information

A Necessary Word of Caution

The IRS Rules Governing DSTs

Beyond Taxes: The Other Benefits of DSTs

Looking For A Qualified Intermediary

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