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With over a decade of experience in the financial sector, Managing Partner Matt Bontrager has seen firsthand how even the savviest investors and business owners miss out on significant tax-saving opportunities simply because they lack the right financial guidance. He founded TrueBooks to provide that guidance and help you turn your tax liabilities into investment opportunities and has helped his clients cut their tax bills with top-tier service and innovative ideas.
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Delaware Statutory Trust investors may own a beneficial interest in a trust that holds investment property rather than owning and managing the property directly.
DST interests are frequently used as replacement property in 1031 exchanges, making exchange timing, basis, depreciation history, and documentation especially important.
A DST investment may carry forward tax attributes from property sold in a prior exchange, which can affect current deductions and future gain.
We help connect your DST investments with your other real estate, income, entities, capital gains, and long-term wealth strategy.
Looking for a broader Las Vegas CPA firm? Visit our homepage to learn more about TrueBooks CPA’s full advisory suite.
SPECIALIZED TAX STRATEGY
A DST may reduce the day-to-day management responsibilities associated with direct real estate ownership, but that does not eliminate tax complexity.
DST investors may need to account for 1031 exchange history, carried-over basis, depreciation, passive activity rules, underlying debt, annual tax reporting, and future sale considerations.
DST ownership can involve multiple layers of tax treatment, particularly when an investor used appreciated real estate to fund the investment through a 1031 exchange.
Understanding how exchange history, basis, depreciation, passive income, and eventual disposition fit together can help prevent tax surprises later.
Planning before selling property, entering a 1031 exchange, acquiring a DST interest, or exiting an existing DST can be significantly more useful than reacting after the transaction is complete.
Tax considerations may affect which options make sense before deadlines or closing dates arrive.
DST investors may need to maintain records related to prior property basis, depreciation schedules, exchange documents, qualified intermediary records, DST subscription documents, distributions, debt allocations, and annual tax reporting.
The longer the investment history, the more important accurate records become.
A DST investment should be evaluated alongside your other real estate, businesses, W-2 or 1099 income, passive activities, retirement accounts, capital gains, estate objectives, and future investment plans.
A strong tax strategy looks beyond a single investment.
HOW WE HELP
DST interests are commonly considered by investors completing a 1031 exchange.
We help evaluate how the relinquished property, exchange structure, replacement investment, debt, and timing affect the tax outcome.
A 1031 exchange generally defers qualifying gain rather than eliminating the underlying tax history.
We help investors track basis from original properties through subsequent exchanges and DST investments.
Depreciation associated with the underlying real estate can affect current taxable income as well as the tax consequences of a future disposition.
We help investors understand depreciation within the context of their overall portfolio and holding strategy.
DST income and deductions may interact with other passive investments, rental properties, partnerships, and business activities.
We review how the DST fits within the investor’s broader passive-income and passive-loss picture.
Many DST properties have financing at the trust level.
An investor’s allocated share of debt may be relevant when evaluating a replacement investment in connection with a 1031 exchange.
Annual DST tax information needs to be coordinated with the rest of the investor’s tax return.
We help ensure the DST is evaluated consistently alongside other real estate and investment activity.
DST properties are eventually sold or otherwise disposed of.
We help investors evaluate potential gain, depreciation history, basis, recapture considerations, and future exchange opportunities before a transaction whenever possible.
DST investments often sit within a much larger real estate strategy.
We help clients plan around future acquisitions, property sales, exchanges, income changes, and long-term wealth goals.
DST tax strategy connects directly with accurate tax filing.
Our advisory work is coordinated with tax preparation so decisions made during the year are reflected correctly on the return.
STRATEGY CONSIDERATIONS
DST interests are commonly used as replacement real estate in properly structured 1031 exchanges.
Investors should evaluate the specific structure of the DST, timing requirements, replacement value, debt considerations, and documentation before assuming the investment fits their exchange strategy.
When appreciated property is exchanged rather than sold outright, the tax basis associated with the prior property can continue into the replacement investment.
Investors who have completed multiple 1031 exchanges may have a long chain of basis history that needs to remain organized.
Depreciation may reduce taxable income during ownership, but prior depreciation can affect the tax consequences when the underlying property is eventually sold.
Current deductions should be evaluated alongside future disposition strategy.
DST investors may also own long-term rentals, short-term rentals, partnerships, syndications, or operating businesses.
Understanding how those activities interact can be important when evaluating passive income and suspended losses.
An eventual DST disposition can raise questions involving basis, capital gains, depreciation recapture, liquidity, and the possibility of another 1031 exchange.
Planning before the sale occurs gives investors more time to evaluate their options.
RELATED SERVICES
Proactive tax planning before year-end and major financial decisions.
Clean financial reporting for investors and business owners.
Tax planning for investors selling investment property and acquiring qualifying replacement real estate.
FREQUENTLY ASKED QUESTIONS
Certain properly structured DST interests may qualify as replacement real property in a 1031 exchange.
The specific DST structure and the investor’s exchange still need to satisfy applicable requirements, so investors should review the transaction before closing.
DSTs may allow investors to acquire a fractional beneficial interest in larger real estate assets without directly managing the property.
They may also provide another potential replacement-property option for investors completing a qualifying 1031 exchange.
A 1031 exchange generally defers qualifying gain rather than eliminating the tax history of the property being sold.
The basis from the relinquished property may affect the basis of the replacement investment, along with additional cash, debt, depreciation, and other adjustments.
DST investors may receive tax deductions associated with their share of the underlying real estate depending on the structure of the investment and their individual tax circumstances.
The available depreciation can also be affected by prior exchanges and the investor’s basis.
Not necessarily.
Cash distributions and taxable income can differ because taxable income may also reflect expenses, depreciation, financing, and other tax items associated with the underlying property.
A future sale may create capital gain, depreciation-related tax consequences, or other taxable income based on the investor’s basis and investment history.
Some investors may evaluate another 1031 exchange at that point.
Yes.
An investor may purchase a DST interest with new capital rather than proceeds from a 1031 exchange.
The basis and tax treatment will differ because there is no relinquished property carrying tax history into the investment.
DST investors should generally maintain:
Good recordkeeping becomes especially important for investors who have completed multiple exchanges.
Nevada does not impose an individual state income tax.
However, DST properties may be located in other states, which can create tax or filing obligations outside Nevada depending on the investment and the investor’s circumstances.
Ideally, before making a major transaction.
Investors should consider speaking with a CPA before:
No.
TrueBooks is based in the Las Vegas area and works with investors whose real estate holdings and tax obligations may extend across multiple states.
