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Can I Use A DST Investment To Defer Taxes?

Yes, you can use a DST (Delaware Statutory Trust) investment to defer taxes. DSTs are a type of investment vehicle that allows investors to pool their money together to invest in real estate. They are often used in 1031 exchanges, which allow investors to defer capital gains taxes on the sale of real estate by reinvesting the proceeds into like-kind property.

When you invest in a DST, you become a beneficiary of the trust and receive a proportional share of the income and capital gains generated by the trust’s real estate investments. Because the DST is structured as a pass-through entity, the income and gains are not taxed at the trust level but are instead passed through to the individual investors.

If you reinvest the proceeds from the sale of a property into a DST through a 1031 exchange, you can defer the capital gains taxes that would otherwise be due on the sale. However, it’s important to note that the deferral is not permanent and you will eventually owe taxes when you sell the DST investment.

It’s also worth noting that DSTs are typically only available to accredited investors, who meet certain income and net worth requirements set by the Securities and Exchange Commission (SEC). If you’re considering investing in a DST, it’s important to consult with a financial advisor or tax professional to understand the tax implications and other risks associated with the investment.