How DSTs May Help Solve Common 1031 Exchange Challenges

CPAs, real estate brokers, and real estate attorneys are advising clients in a 1031 exchange and evaluating whether a Delaware Statutory Trust (DST) investment may be appropriate as replacement property. DSTs are not a fit for every situation, but they are sometimes considered when timing, management, financing, or diversification needs make traditional replacement property difficult to source and close within IRS deadlines.

Common 1031 Scenarios Where DSTs Are Often Evaluated

Below are situations where professionals may explore DSTs as a replacement property solution within a 1031 exchange.

Tight 45-day identification timeline — when a client needs to identify replacement property quickly and wants additional options to evaluate.
Limited replacement property inventory — when sourcing a suitable property at the right price or terms is challenging.
A preferred replacement property falls through — when a backup strategy is needed to help preserve exchange momentum.
Leverage replacement considerations — when a client is replacing debt and evaluating non-recourse financing structures available in many DST offerings.
Desire for passive real estate ownership — when the client prefers not to take on day-to-day property management.
Diversification goals — when the client is evaluating allocation across multiple properties, markets, or asset types (subject to availability and suitability).

Have a Client Facing One of These Challenges?

If you’re working with a client who is approaching a deadline, evaluating passive ownership, or struggling to source replacement property, we can discuss how DST options are typically evaluated as part of a 1031 exchange.

Discuss a Client’s 1031 Scenario

Why Timing Matters in These Situations

In a 1031 exchange, the timeline can compress quickly—particularly during the 45-day identification period. When DSTs are being considered, professionals often need time for offering review, due diligence, suitability review, and coordination with the qualified intermediary. Starting the conversation early helps preserve flexibility and avoids last-minute decision-making.

How We Work with CPAs, Brokers, and Qualified Intermediaries

We work alongside the client’s professional team to provide educational information regarding DST structures and how they are commonly used within a 1031 exchange. CPAs and legal advisors remain responsible for tax and legal guidance, and the qualified intermediary facilitates the exchange process.