Can I 1031 exchange into a DST (Delaware Statutory Trust)?
Yes. A fractional interest in a properly structured Delaware Statutory Trust (DST) is treated as direct ownership of real estate under IRS Revenue Ruling 2004-86, so it qualifies as replacement property in a 1031 exchange. DSTs are passive and professionally managed, which makes them popular for investors who want to defer tax without the work of being a landlord.
DSTs are also used as a backup identification: because they can close quickly, they’re a place to put proceeds if your primary target falls through before day 45.
They are securities — illiquid, fee-bearing, and sold only to accredited investors through a broker-dealer or advisor — so they suit some situations and not others. Read the DST definition and compare with tenants-in-common.
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General education — not tax or legal advice. This explains how §1031 exchanges work in general terms and uses simplified assumptions. Rules and tax rates change and your situation is specific. Talk to a qualified CPA or tax attorney before you rely on any of it. See our full terms & legal notice.