DSTs and 1031 Exchanges

For real estate investors, a 1031 Exchange is a popular tax deferral option, and Delaware Statutory Trusts (DST) provide a passive 1031 option for investors who no longer want the hassle of direct asset ownership. A 1031 Exchange enables real estate investors to defer paying taxes (including capital gains taxes, state income tax and depreciation recapture on the transfer of rental property). DSTs are qualified for 1031 Exchanges because, in the eyes of the tax code, they qualify as direct property ownership.

How DSTs Work With 1031 Exchanges

Delaware Statutory Trusts are investment vehicles, similar to LLCs or limited partnerships that investors use to own a fraction of a commercial or high-caliber property. Every investor acquires a pro-rata portion of ownership in a DST by investing and this continues until each fractional investor owns the property that the DST initially purchased.

A 1031 DST Exchange is a type of syndication in the sense that a separate legal entity is formed for the purpose of purchasing a property. A 1031 exchange is possible because the IRS considers the DST investor's ownership of the security equity share ownership. The IRC Section 1031 recognizes each beneficiary in the trust as having a personal stake in the new property.

The 1031 Exchange Process

DAY 1

Sell Relinquished Property

Investor sells property and proceeds are escrowed with a Qualiﬁed Intermediary (QI)

by DAY 45

Identify Replacement Property

Qualiﬁed Intermediary transfers funds for purchase of replacement property

by DAY 180

Acquire Replacement Property

Investor receives new property
or DST interest.

For a DST to qualify for a 1031 exchange, the sale proceeds of the transferred property must get invested into a like-kind property of comparable or superior value. 1031 Exchange rules state that investors have 45 days from the sale date of the relinquished property to identify a suitable replacement property and 180 days to close on the purchase of it.

As DSTs provide a pre-packaged investment vehicle, exchange investors can do their due diligence immediately and satisfy the 45-day ID deadline and the 180 days required by the 1031 exchange laws.

Benefits of 1031 DST Exchanges

Access to Institutional-Quality Property
DSTs allow investors to acquire partial ownership in properties that otherwise would be out-of-reach.
Supports Estate Planning
DST rules allow investors to identify heirs who can inherit the investment at a stepped up cost basis, which can make them a useful tool for estate planning purposes
Limited Liability
The DST structure protects investors from personal obligations that go beyond their investment. Loans are nonrecourse to the investor.

Diversification
With relatively low minimum investment amounts, investors can choose to place their funds in multiple DST investments to diversify their portfolio by property type, location, or asset class.
Passive Investment
DST property management is handled by a professional Sponsor making this a passive investment for individuals who invest in this structure.
Tax Advantages
In addition to the deferral of capital gains taxes, DSTs provides tax advantages such as interest expense and asset depreciation.

Expand Your Portfolio with High-Caliber Commercial Real Estate

DSTs can eliminate the hassles associated with direct asset ownership while owning a fraction of institutional-grade properties.

INVESTORS
FINANCIAL ADVISORS

Bridgeview DST Investment Programs are sold by broker dealers and registered investment advisors authorized to do so.

Contact your financial professional to learn more. Or, for help finding a financial professional please fill out the form below or contact BV at ir@bvcapitaltx.com for more information on 1031 DST Investments.

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*The information contained herein does not constitute an offer to sell nor is it a solicitation of an offer to purchase any security. Offers will only be made through a private placement memorandum to accredited investors and where permitted by law. Investments in the firm’s limited partnerships involve a high degree of risk, including the possible loss of your investment, and they are potentially illiquid with an uncertain liquidity date. Prospective investors should carefully review the “Risk Factors” section of any private placement memorandum. Past performance is not indicative of future results. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.