A Capital Account in the context of a Delaware Statutory Trust (DST) industry, much like in other financial and investment contexts, is a ledger that records the equity contribution of each individual trust beneficiary or investor. This includes their initial investments, subsequent contributions, and their share of profits or losses, among other financial activities.
In a DST, property is held, managed, administered, invested, and/or operated for the benefit of the trust’s beneficial owners. Each beneficial owner typically has an undivided fractional interest in the trust property.
Here’s how the Capital Account works:
- Initial Investment: When an investor first buys into the DST, the amount they contribute is recorded in their Capital Account. This represents their initial equity in the trust.
- Subsequent Contributions: If the investor contributes additional funds to the trust, these amounts are also added to their Capital Account.
- Profits and Losses: As the DST operates and generates profit or loss, these are proportionally allocated to each investor’s Capital Account based on their percentage interest in the trust. This means that if the DST makes a profit, the amount of profit attributable to each investor is added to their Capital Account. Conversely, if the DST incurs a loss, the corresponding amount is subtracted from each investor’s Capital Account.
- Distributions: When the DST makes a distribution to an investor (for example, a share of the income generated by the trust’s properties), this amount is typically subtracted from the investor’s Capital Account.
The balance of an investor’s Capital Account at any given time represents their current equity in the DST.
It’s important to note that the terms of each DST may vary, and the specifics of how the Capital Accounts are managed and adjusted could be different from one DST to another.