Your Property
Total depreciation taken during ownership. Recaptured at 25% federal rate.
Tax Rates & DST Assumptions
DST Assumptions
Typical DST cash-on-cash distributions range from 4.5%–6.5%. Not guaranteed.
Scenario A: Sell & Realize Gain
Tax Breakdown
Scenario B: 1031 Exchange into DST
Tax Deferred
Projected Income Comparison (10 Years)
The Bottom Line
Over the next 10 years, exchanging into a DST could put roughly $489,636 more in your pocket than selling outright.
That's roughly $173,741 in additional cash distributions on top of the $315,895 in capital-gains and recapture taxes you'd otherwise hand to the IRS at closing — taxes that stay invested and keep working for you instead. To match that result by selling and reinvesting the after-tax proceeds, you'd need to earn 8.4% a year, every year, just to break even.
Let's run your numbers togetherWhat is a DST?
A Delaware Statutory Trust (DST) is a legal entity that holds title to investment real estate, allowing multiple investors to own fractional interests. DSTs qualify as like-kind replacement property under Section 1031 of the Internal Revenue Code, enabling investors to defer capital gains and depreciation recapture taxes by reinvesting sale proceeds into professionally managed real estate — without the responsibilities of active property management. DSTs are commonly used by investors looking to exit active landlording while preserving their tax-deferred equity.
Key Considerations
1031 Exchange Deadlines
You have 45 days from sale to identify replacement property and 180 days to close. A qualified intermediary must hold the funds — you cannot take constructive receipt.
DST Liquidity
DST interests are illiquid — there is no public market for them. Hold periods typically range from 5–10 years. You cannot easily sell your interest before the trust disposes of the underlying property.
Mortgage Boot
To fully defer taxes, the replacement property must be of equal or greater value, and debt must be replaced. If the DST carries less leverage than the relinquished property, the difference (“mortgage boot”) may be taxable.
Step-Up at Death
Under current law, heirs receive a stepped-up cost basis at the owner's death, potentially eliminating the deferred gain entirely. This makes 1031 exchanges particularly powerful for estate planning.
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