What Is A DST

Delaware Statutory Trusts

The Delaware Statutory Trust (DST) structure has emerged as an alternative for the fractional ownership of real estate. The DST is a separate legal entity formed as a trust under Delaware statute. In 2004, the IRS issued Revenue Ruling 2004-86, allowing the use of a DST for fractional ownership of real estate in which 1031 Exchanges are involved.

A DST is structured so that each beneficiary (investor) owns a beneficial interest in the trust. The managing trustee of the DST is either the sponsor or an affiliate of the sponsor. The DST owns 100 percent of the fee interest in the property.

Potential uses/benefits of a DST include:

• completion of a 1031 Exchange, provided that certain requirements are met
• combined with a master lease arrangement, providing management oversight and financial backing customarily associated with master lease structures
• reduced potential liability and costs
• tax-deferred 1031 exchange benefits upon sale of the property
• lower minimum investments since a DST can have up to several hundred beneficiaries