Yes, you can do a 1031 exchange for a Delaware Statutory Trust (DST). A 1031 exchange allows an individual to defer paying capital gains taxes on the sale of an investment property by investing the proceeds into like-kind property. A DST is considered a like-kind property, making it eligible for a 1031 exchange.
The process of completing a 1031 exchange for a DST is similar to any other 1031 exchange, but it is important to work with a qualified intermediary, an attorney familiar with 1031 exchanges, and a real estate professional who specializes in DST investments to ensure that the exchange is completed correctly and complies with the IRS requirements.
Here’s how to complete a DST 1031 exchange:
- Identify the property to sell (the “relinquished property”).
- Choose a DST property to purchase as the replacement property.
- Notify the seller and buyer of your intent to complete a 1031 exchange.
- Close on the sale of the relinquished property.
- Place the proceeds from the sale into a qualified intermediary’s account.
- Use the funds from the qualified intermediary’s account to purchase an interest in the DST property.
It is important to work with a qualified intermediary, an attorney familiar with 1031 exchanges, and a real estate professional who specializes in DST investments to ensure that the exchange is completed correctly and complies with IRS requirements.
By completing a DST 1031 exchange, an individual can defer paying capital gains taxes on the sale of the relinquished property until they sell their interest in the DST property in the future. This can result in significant tax savings, as the deferred taxes are compounded over time.