Delaware Statutory Trust
A Delaware Statutory Trust is a legal entity that holds real estate and lets multiple investors own fractional, passive, 1031-eligible interests in the property.
Definition
A Delaware Statutory Trust (DST) is a legal entity, formed under Delaware law, that holds title to income-producing real estate and divides ownership into fractional beneficial interests. It is a leading vehicle for 1031 exchange investors who want to defer tax without the hassle of managing property directly.
Under IRS Revenue Ruling 2004-86, a beneficial interest in a properly structured DST is treated as a direct interest in real property, so it qualifies as like-kind replacement property. A sponsor acquires an institutional-grade asset, say a $75 million medical office portfolio, and sells interests to accredited investors, often with minimums around $100,000.
DSTs are entirely passive: the trustee handles all decisions, and investors receive monthly distributions plus a share of appreciation when the property sells. The trade-offs are illiquidity, no control, and the seven deadly sins restrictions that limit the trust from raising new capital or refinancing after the offering closes.
Key points
- A Delaware entity holding real estate in fractional interests
- Qualifies as 1031 replacement property under Rev. Rul. 2004-86
- Sold to accredited investors, often around $100,000 minimum
- Fully passive; the trustee makes all decisions
- Illiquid, with restrictions on refinancing and new capital
Related terms
Jerry Baker founded Baker 1031 Investments to help exchange investors move from active property ownership into passive, institutional-quality real estate through DST, 721 exchange, mineral royalty, and Opportunity Zone strategies. He holds the FINRA Series 22 and Series 63 registrations and the Securities Industry Essentials (SIE) qualification. Read full bio →
Reviewed by the Aurora Securities, Inc. compliance team — Aurora Securities, Inc., member FINRA/SIPC. Last reviewed July 2026. Securities are offered through Aurora Securities, Inc.; Baker 1031 Investments, LLC is independent of Aurora Securities, Inc.
This glossary entry is educational and is not investment, tax, or legal advice, or an offer to sell or a solicitation to buy any security. Definitions are general and may not reflect your specific circumstances — consult your own CPA and attorney. Past performance does not guarantee future results.