Can You Do a 1031 Exchange on the Sale of a DST (Delaware Statutory Trust)?

Is it possible to do a 1031 exchange by selling a Delaware Statutory Trust (DST)?

A DST is a unique creature. When you own the beneficial interest in a DST, you are deemed to own your share of the underlying real estate. As long as the DST is still a DST, you could likely do a 1031 exchange on the disposition of your beneficial interest.

If the DST has already matured into an UPREIT, then you don’t own an interest in real estate any longer. Rather, you own a partnership interest, which is not eligible for 1031 exchange. So it really depends where the DST is on the procedural timeline.

You can do a 1031 exchange into any real estate in the US that is like-kind. If you sell your beneficial interest in a DST and come back into cash with your intermediary, you don’t have to buy another DST. You can buy any real estate that’s held for investment or business purposes.

Contact an Experienced Qualified Intermediary

If you are looking for a 1031 exchange qualified intermediary, CPEC1031, LLC has you covered! We have been operating in the 1031 exchange industry for more than two decades. During our time in business, we have gained valuable knowledge and insights that we can put to use on your next like-kind exchange. Reach out to us today at our Twin Cities office to learn more about 1031 exchanges and see if you are a good candidate for a 1031 exchange of your investment real estate.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

Can You Identify 1031 Replacement Property Outside of the 45-Day Identification Period?

In order to complete a 1031 exchange, the replacement property must be properly identified within the 45 day identification period. If the property is not identified within that timeframe, you are SOL (Statutorily Out of Luck).

Knowing that you have those restrictions in place, you could identify some “backup” properties using the three-property identification rule to give yourself a little wiggle room in case one of the properties falls through.

This also illustrates the importance of preparedness in a 1031 exchange. Like-kind exchanges are governed by strict rules and regulations and there are many things that can go wrong during the process. It’s important to give yourself enough time to set everything up properly and account for potential pitfalls so you can give yourself the best shot at 100% tax deferral.

1031 Exchange Company in Minnesota

CPEC1031, LLC is a Minnesota-based like-kind exchange company that facilitates exchanges under section 1031 of the Internal Revenue Code. Our team of qualified intermediaries is here to help you through all the unique details of your 1031 exchange of investment or business real estate. Contact our like-kind exchange professionals today to learn more about the 1031 exchange process and find out if your property qualifies for 1031 exchange tax-deferral. You can reach us at our Twin Cities office, located in downtown Minneapolis.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

Advanced Build-to-Suit Exchange Options

Your mantra when conducting a 1031 exchange should be to acquire replacement property of equal or greater value and equal or greater equity. A build-to-suit exchange is a way to fix the problem of your replacement property being of lesser value than your relinquished property, as it allows you to construct improvements to add value. The downside is you only have 180 days in a forward exchange to construct those improvements. You can’t build the Taj Mahal in that time period.

A build-to-suit exchange works well when the improvements aren’t extraordinarily difficult. Some examples of improvements that are typically quick and easy to accomplish within your 180 day timeline:

• Replacing the roof on the property

• Repaving the parking lot

If you want to do extensive improvements to your property, you can look into a reverse construction exchange. Let’s say that you have a $70 million apartment complex that was built in 1965. This complex has insufficient parking, no in-unit laundry, and the forecast for appreciation is not good. As a result, you decide you want to sell this property, but you’re wary of the taxes that will come with such a sale. On top of that, you can’t find any existing replacement property that meets your needs.

What you might do is construct a massive replacement property yourself in a non-safe-harbor reverse exchange. The safe harbor limits your holding period to 180 days. In a non-safe-harbor exchange, the holding period is indefinite. You could have the qualified intermediary act as your surrogate and buy the land you want and construct the improvements to your specifications. When you’re getting close to completion of construction, you list your 1965 apartment complex for sale so that you come into cash on your 1031 exchange at roughly the same time that the certificate of occupancy is being issued on your new replacement property. On form 8824, it looks like you did a forward exchange – it’s just that the replacement property was purchased and held initially by a qualified intermediary under a non-safe-harbor exchange.

Twin Cities 1031 Exchange Services

If you want to learn more about how a 1031 exchange can save you money in capital gains taxes, contact the team at CPEC1031, LLC. For more than twenty years, we have been helping taxpayers with their like-kind exchanges under section 1031 of the Internal Revenue Code. We can help guide you through the process, regardless of where your property is located or how big or small it is. Reach out to us today at our Twin Cities office (located in downtown Minneapolis) to learn more about our services and see how we can help.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

How to Deal with Basis in a 1031 Exchange

When you’re doing a 1031 exchange, your basis is transferred to the new replacement property. The first dollars off the table are boot. If you buy down in value on your replacement property, you’ll receive boot. If you take receipt of cash or any other non-like-kind property during the exchange process, that’s taxable boot. If you over-borrow and put too much debt on the replacement property (resulting in cash coming back to the buyer), that’s taxable boot.

Let’s imagine you do a 1031 exchange into a DST (Delaware Statutory Trust). The trustee of the DST exercises its option to suck the property up into a REIT via a 721 contribution. Now let’s say that you held that property for 4 or more years. At that point you would own a partnership interest in an UPREIT. When you’re redeeming a partnership interest you get to pick which part of the partnership interest you would like to redeem first. The first bit of interest you want to redeem is that which has basis. This allows you to partially recoup your basis on the property, thus mitigating your tax risk.

Defer Your Capital Gains Tax Burden

Find a qualified intermediary to help with your next 1031 exchange of like-kind real estate by contacting the team at CPEC1031, LLC. We have more than twenty years of experience in the 1031 exchange industry. We can put our experience to work on your next 1031 exchange and help ensure that you are able to defer 100% of your capital gains tax burden. Our intermediaries are here to help you through every step of the exchange process – from the sale of your relinquished property to the acquisition of your replacement property.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved

1250 vs. 1245 Gain in a 1031 Exchange: What’s the Difference?

There are two types of gain in a 1031 exchange. If your relinquished property has improvements (such as a building), that building is depreciated over 39 years. But there are components of the building that are not critical to the structure (things like ornamental lights, non-structural walls, and more). These non-critical components can be segregated out for more rapid depreciation in a cost segregation study.

In a real estate transaction, you may have two kinds of gain:

1. 1250 Gain. The gain from the sale of the land (which has slow and steady depreciation).

2. 1245 Gain. Accelerated depreciation from the non-critical components that depreciate at a faster rate.

If you don’t exchange into a replacement property with an equivalent amount of 1245 components, you could have some recognition of gain. You can still do a 1031 exchange from improved property to unimproved property, but you have to consider your accelerated depreciation. Sometimes it’s better to buy a replacement property that contains a lot of 1245 components.

1031 Exchange Transactions Made Easy

Contact the team at CPEC1031, LLC today to learn more about the 1031 exchange process and see how we can help you save money in capital gains taxes when selling qualifying real estate. You can reach out to us at our Twin Cities office, which is located in the heart of downtown Minneapolis. Note that we work with taxpayers conducting 1031 exchanges throughout the state of Minnesota, as well as the United States at large. No matter where your property is located, our intermediaries can help you defer taxes in a 1031 transaction.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2026 Copyright Jeffrey R. Peterson All Rights Reserved