A Delaware Statutory Trust (DST) is a specialized legal entity designed for owning, managing, or investing in real estate. It allows investors to gain fractional ownership of high-quality assets that qualify as replacement properties in a 1031 Exchange.
When it comes to tax liability, DST investors should consider several scenarios, including:
Income and capital gains
1031 Exchanges
The requirement to purchase a property of equal or greater value.
At the end of each tax year, DST investors receive a 1099 form that outlines the income earned from their investment. This information is then transferred to schedule E of their tax return and is subject to income tax.
While DSTs have a unique legal structure, there are some similarities in how they are taxed compared to private equity investments.
Given the complexity of tax situations, it is advisable for DST investors to work with a qualified CPA who can ensure that all tax requirements related to their DST investment are met. This will help investors navigate the intricacies of DST taxation and maximize their tax benefits.