INVESTOR'S GUIDE
WHAT IS A DST?
A straightforward walkthrough of the Delaware Statutory Trust: how investors defer capital gains on appreciated real estate while trading active management for a professionally run, passive portfolio.
INVESTOR'S GUIDEBOOK
A passive path through a 1031, explained in plain language
Section 1031 has been part of the tax code since 1921, and since 1995 it has allowed investors to exchange into a partial, professionally managed interest in real estate, most often structured as a Delaware Statutory Trust. This guide walks through how a DST exchange actually works, using non-technical language, a worked tax example, and clear timelines throughout.
- What a Delaware Statutory Trust (DST) exchange is and how it differs from a traditional 1031
- The potential value of deferring capital gains, depreciation recapture, and surtax liability
- The 45- and 180-day exchange timeline, from sale to reinvestment
- What qualifies, and what doesn't, as replacement property
- Who tends to be a good candidate for a DST exchange
- How a DST can help pass an appreciated asset to heirs with a stepped-up basis
WHAT DEFERRAL IS ACTUALLY WORTH
One sale. Two very different outcomes.
A simplified, hypothetical example from inside the guide: an investor sells a $1,000,000 property with a $100,000 basis, with and without a 1031 (DST) exchange.
SELL OUTRIGHT
$724,000
available for reinvestment, after $276,500 in combined federal, state, NIIT, and recapture taxes
1031 (DST) EXCHANGE
$1,000,000
full sale proceeds reinvested, $0 owed to the IRS
$276,500 kept working for you from the same sale, with no better deal required
Hypothetical example for illustrative purposes only; it does not represent an actual or specific investment. Assumes a 20% federal capital gains rate, 4.25% state tax, 3.80% NIIT surtax, and 25% depreciation recapture rate. Actual figures depend on individual tax circumstances and are never guaranteed. Consult your tax advisor. Full math is in the guide.
INSIDE THE GUIDE
From sale to passive ownership
Written to be read start to finish or used as a reference while you're actually mid-exchange.
What Is a DST Exchange?
How a Delaware Statutory Trust exchange differs from a traditional 1031: the investor trades active management for passive ownership in a professionally managed portfolio.
How a 1031 Exchange Works
The history of Section 1031, the 1995 provision that enabled fractional DST ownership, and the qualified intermediary process from sale to reinvestment.
The 45- and 180-Day Timeline
The exact clock: sale proceeds go to a qualified intermediary, a replacement property must be identified within 45 days, and the purchase must close within 180.
What Qualifies as Replacement Property
Rental houses, apartment buildings, warehouses, and other real property that qualify, and the bonds, securities, and personal-use property that don't.
The Potential Benefits
A predictable income stream, passive ownership with no "toilets, tenants, and trash," continued capital gains deferral, and diversification across properties and states.
Are You a Candidate?
Business sellers, investors retiring from active management, farmland owners, and operators with a small "leftover" piece of an exchange.
Passing an Appreciated Asset to Heirs
How a stepped-up basis at death can potentially eliminate capital gains tax on the appreciation entirely.
A CLOSER LOOK
What counts as a replacement property?
Like-kind is broader than most investors expect, but it isn't unlimited.
Qualifies
✓ Rental houses
✓ Rental condominiums
✓ Apartment buildings
✓ Shopping centers
✓ Warehouses
✓ Office buildings
✓ Raw or unimproved land
✓ Leasehold interests (30+ years)
✓ Tenancy-in-common interests
Does not qualify
✗ Bonds
✗ Securities (including REIT stock)
✗ Notes
✗ Partnership interests
✗ Property outside the U.S.
✗ Dealer property held primarily for resale
✗ Property held primarily for personal use
FREE DOWNLOAD
Get the guide before your next decision
Whether a sale is already on the table or you're planning years out, this is the reference to read before the 45-day clock starts.
+1 (212) 575-2152 · invest@knpre.com · New York | Los Angeles
Keystone 1031 is a member of the Keystone National Properties LLC Family of Companies
© 2026 Keystone National Properties LLC
For Educational Use Only
Not an offer to buy, nor a solicitation to sell securities. Information herein is provided for information purposes only, and should not be relied upon to make an investment decision. All investing involves risk of loss of some or all principal invested. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing.
For more information on Emerson Equity, please visit FINRA’s BrokerCheck website. You can also download a copy of Emerson Equity’s Customer Relationship Summary to learn more about their role and services.
Important Disclosure
The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by the issuer, or any affiliate, or partner thereof ("Issuer"). All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM. With respect to any “targeted” goals and performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. All investments carry the risk of loss of some or all of the principal invested. These “targeted” factors are based upon reasonable assumptions more fully outlined in the Offering Documents/ PPM for the respective offering. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment. These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified. Past performance is no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.
Securities through Emerson Equity LLC Member: FINRA/SIPC. Only available in states where Emerson Equity LLC is registered. Emerson Equity LLC is not affiliated with any other entities identified in this communication.
1031 Risk Disclosure:
• There is no guarantee that any strategy will be successful or achieve investment objectives;
• Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
• Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
• Potential for foreclosure – All financed real estate investments have potential for foreclosure;
• Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.
• Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
• Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits.
By continuing to use this website, you agree to our Privacy Policy and consent to the use of cookies, tracking pixels, and similar technologies that may collect information such as your IP address, browsing activity, and usage data in accordance with California Penal Code § 638.51 and the California Invasion of Privacy Act (CIPA).