Up to 180 days from your sale closing. You have two firm deadlines: Day 45 to identify replacement property in writing to your Qualified Intermediary, and Day 180 to close on it. For DST replacements, subscription paperwork typically takes 5 to 10 business days, so most DST closings happen well before the 180-day deadline. Direct property exchanges often run closer to the full 180 due to inspection, financing, and title timelines.

The like-kind standard is broad. Almost any real property held for investment or business use qualifies as like-kind to almost any other real property held for the same purpose. A strip center can be exchanged for an apartment building. Raw land for an industrial property. Direct real estate for a DST interest.

What does NOT qualify: personal residences, dealer inventory (property held for resale), foreign real estate exchanged for U.S. real estate, and partnership interests.

The exchange fails. The IRS does not grant extensions, even for natural disasters in most cases. The full gain on your relinquished property becomes immediately taxable. This is why the 1031 Calculator exists, to make sure you know exactly when your Day 45 falls from the moment you close on your sale. If you are approaching your deadline, talk to a specialist immediately.

You must pick one of three IRS identification rules by Day 45.

Three-property rule. Identify up to three replacement properties regardless of their total value. Most common for direct real estate exchanges.

200% rule. Identify any number of replacement properties as long as their combined fair market value does not exceed 200% of the relinquished property’s sale price. Common when an investor wants flexibility across many DST options.

95% rule. Identify any number of replacement properties of any value, but you must acquire at least 95% of the total identified value. Rarely used because the threshold is unforgiving.

Pick one rule when you submit your identification. You cannot mix rules.

No. Section 1031 applies only to property held for investment or productive use in a trade or business. Personal residences and second homes used as personal property are excluded from 1031 treatment.

There are separate tax provisions (Section 121) for primary residences that allow some gain exclusion when you sell, but that is a different mechanism. If you converted a former primary residence to a rental and held it for investment for some period, parts of it may qualify. Consult your CPA.

Yes, but the entity that sells the relinquished property must be the same entity that acquires the replacement property. If a partnership sells the property, the partnership must complete the exchange. Individual partners cannot break off and 1031 their pro-rata share without restructuring the partnership first (a process called a “drop and swap”) which has its own tax and timing risks.

For LLCs treated as disregarded entities for tax purposes (most single-member LLCs), the IRS treats the individual member as the taxpayer for 1031 purposes. Consult your CPA before any entity restructuring.

A reverse exchange is when you acquire the replacement property before you sell the relinquished property. The IRS allows it under Revenue Procedure 2000-37, but the structure is more complex than a forward exchange. An Exchange Accommodation Titleholder (EAT) holds title to one of the properties during the transaction.

Reverse exchanges still have a 180-day clock. They are more expensive to set up and more constrained on financing. See the Reverse 1031 Exchanges guide for the full mechanics.

A failed 1031 means the gain becomes immediately taxable. Depending on where in the process it failed, you may have partial deferral options or structural moves that salvage some of the deferred gain. Acting quickly matters.

See the Failed 1031 Recovery guide for the recovery playbook, and talk to a specialist immediately if you are still inside the 180-day window.

Yes. The IRS requires a Qualified Intermediary (QI) to hold your sale proceeds throughout the exchange. If you take possession of the funds, even briefly, the exchange is invalid under constructive receipt rules and the entire gain becomes taxable. The QI must be engaged before you close on your sale.

QIs are not all created equal. Ask about segregated accounts, audit history, bonding and insurance, and fee structure before you sign.

Constructive receipt means you have access to or control over the sale proceeds, even if the money never physically reached you. The IRS treats constructive receipt as actual receipt, and that disqualifies your 1031 exchange.

The most common ways investors trigger constructive receipt: asking the closing agent to wire any portion of proceeds to them “for expenses,” letting funds sit in their attorney’s IOLTA account, or signing for the funds at closing. Avoid this by routing every dollar through your QI from day one.

Boot is any value received in the exchange that is not like-kind real property. The two most common forms are cash boot (when you receive cash from the sale that does not get reinvested) and mortgage boot (when the debt on the replacement property is less than the debt on the relinquished property).

Boot is taxable to the extent of the gain. Receiving $100,000 of boot on an exchange where your total gain is $500,000 means $100,000 is taxable now and $400,000 is deferred. Boot does not invalidate the exchange, but it does shrink the deferral.

Usually, but not always. Most states conform to federal Section 1031 for state income tax purposes, which means a properly structured 1031 defers both federal and state tax on the gain.

The exceptions are meaningful. California requires annual Form FTB 3840 filings when you 1031 California-source gains into out-of-state property, and the gain remains California-taxable when eventually recognized. New Jersey requires Form GIT/REP-3 to avoid an exit-tax withholding at closing. Pennsylvania only began recognizing federal 1031 for tax years after December 31, 2022 (Act 53 of 2022). See our 1031 by State pages for the specifics in your state.

Your tax basis in the relinquished property transfers to the replacement property, adjusted for any boot received and any additional cash invested. This is why a 1031 defers rather than eliminates tax: the deferred gain rides along with your basis until the replacement property is eventually sold without further deferral.

The strategy known as “swap till you drop” uses serial 1031 exchanges throughout the investor’s lifetime. At death, heirs receive a step-up in basis to current market value, eliminating the deferred gain. See the Inherited Property and Step-Up Basis guide for how this works.

Yes. IRS Form 8824 (Like-Kind Exchanges) is filed with your federal income tax return for the year the exchange was completed. Your QI provides the final closing statement and identification letter; your CPA uses those to complete Form 8824 and track your basis in the replacement property.

Keep all exchange documentation indefinitely. The basis carries forward into future tax years, and you may need the original 1031 records decades later if the chain of exchanges continues.

A 1031 exchange defers depreciation recapture along with capital gains. The accumulated depreciation taken on the relinquished property rides forward to the replacement property in the form of carry-forward basis, and gets recaptured at the same higher rate (currently 25% for real property under Section 1250) when the property is eventually sold without further deferral.

Practically, depreciation recapture is one of the largest hidden costs of selling investment property outright. For an investor who has owned a rental for 20+ years, recapture can dwarf the capital gain itself. The deferral matters.

A Delaware Statutory Trust (DST) is a legal structure that lets multiple accredited investors hold fractional ownership of institutional-grade real estate, such as apartment buildings, industrial parks, medical offices, or retail centers, through a single trust. Instead of buying a whole building, you buy a beneficial interest in the trust that owns it.

The IRS recognizes a DST interest as like-kind to direct real estate, which means you can use it as replacement property in a 1031 exchange. That is why DSTs have become a common path for investors selling appreciated rental property who want to defer the gain without taking on another property to manage.

A 1031 exchange is the tax strategy: IRC Section 1031 lets you defer capital gains tax when you swap one investment property for another like-kind property. A DST (Delaware Statutory Trust) is one type of replacement property you can use inside a 1031 exchange.

Many investors use a DST because it provides passive ownership without management responsibility, while still satisfying the like-kind requirement. You can do a 1031 without using a DST, but you cannot use a DST as 1031 replacement without doing a 1031.

DSTs are generally illiquid. Most investors hold their interest until the sponsor sells the underlying property, which typically happens 5 to 10 years after acquisition. There is no public secondary market for DST interests. Some sponsors facilitate private buyouts, but they are rare and usually at a discount.

Treat your DST investment as a long-term hold matching the sponsor’s projected disposition timeline. If liquidity matters more than tax deferral, a DST may not be the right fit. Talk to a specialist about alternatives.

DST distributions are typically reported on Form 1099 and taxed as ordinary income to the investor, less the depreciation and operating expense deductions that pass through. Because real estate generates substantial depreciation, a meaningful portion of cash distributions may be sheltered for tax purposes during the hold period.

The full tax picture (current distributions vs. eventual recognized gain) depends on the specific offering, your basis, and your individual tax situation. Your sponsor provides annual K-1 or 1099 statements; your CPA handles the actual filing.

A 721 UPREIT exit is a tax-deferred path that some DSTs offer at the end of the hold period. Instead of selling the property and distributing cash to investors, the DST contributes the property to the operating partnership of a public or non-traded REIT in exchange for operating partnership units (sometimes called “OP units”).

The contribution qualifies as a Section 721 exchange, deferring tax on the gain. Investors receive OP units that represent fractional ownership in the broader REIT portfolio. Over time, the OP units can be converted into REIT shares, which can be sold (a taxable event) or held for diversified passive income.

Not every DST has a 721 exit option. Read the Private Placement Memorandum carefully to confirm before subscribing.

DST offerings typically include an acquisition fee (paid at closing, often 1% to 3% of purchase price), an asset management fee (annual, often 0.5% to 1.5% of equity raised), a property management fee (paid to a third party or sponsor affiliate, 3% to 5% of gross rents), and a disposition fee (paid when the property sells, often 1% to 3% of sale price). Some offerings also include a sponsor promote or carried interest above a preferred return threshold.

The total fee load and the structure of those fees vary materially across sponsors. See the DST Fees Explained guide for what each fee compensates and how to compare across offerings.

Most DSTs are structured for a 5 to 10 year hold. The sponsor typically projects a target hold period in the Private Placement Memorandum but retains discretion on the exact disposition date based on market conditions and the property’s performance.

Plan for the upper end of the range. If your liquidity needs require a shorter horizon, a DST may not be the right vehicle.

At the end of the hold, the sponsor sells the underlying property and distributes the proceeds to investors. Investors then face three options: recognize the gain and pay tax, do another 1031 exchange into new replacement property (continuing the deferral), or, if the DST offers it, accept a 721 UPREIT exit into REIT operating partnership units.

Decide your end-of-hold path before subscribing, not after. The specialist conversation should cover this.

Yes, to subscribe to a DST. DSTs are Reg D private placements offered exclusively to accredited investors. Generally, individuals with net worth above $1 million (excluding primary residence) or income above $200,000 individually / $300,000 jointly for the past two years.

The educational content on this site is open to anyone, but a specialist conversation requires accreditation self-attestation.

No. The specialist conversation is free and no-obligation. Specialists are FINRA/SIPC-registered representatives within our registered distribution network. They earn compensation only if you eventually subscribe to a securities offering, and that compensation is fully disclosed in the offering documents before you sign anything.

We share your information only with the registered representative assigned to your geographic region within our FINRA/SIPC-registered distribution network. We do not sell, rent, or share your information with third-party marketers, list brokers, or unaffiliated sponsors.

The information you provide is used to qualify you for accreditation, route you to an appropriate specialist, and follow up on your inquiry. See our Privacy Policy for the full data-handling commitment.

Most DST websites are sponsor-controlled marketing channels promoting a single offering. This site is structured as an educational resource with plain-English explanations, honest pros and cons, and a specialist match through our FINRA/SIPC-registered distribution network. We do not pitch specific deals. We route you to a registered representative who can walk you through your options based on your situation.

When you submit a form (calculator checklist, talk-to-a-specialist), we route the inquiry to a FINRA/SIPC-registered representative in our distribution network based on your geographic region and your stated situation (45-day window, planning a sale, researching). The representative reaches out within 24 hours.

The conversation is informational. The representative has no authority to bind you to anything; subscriptions only happen after you have reviewed the Private Placement Memorandum, completed an accredited-investor verification, and made an affirmative election. See our About page for the full distribution and editorial standards.

Yes. Our Sponsor Evaluation Framework walks through three tests you can apply to any DST sponsor (including us) using publicly available information and a few targeted questions. The Sponsor Due Diligence guide adds the deeper checks (SEC filings, FactRight or Cherry Bekaert reports, track record verification) for investors who want to dig in before any specialist conversation.

For the initial conversation, nothing. The specialist can talk through your situation based on what you tell them.

If you want to move toward a subscription, you will eventually need: documentation of accredited investor status (W-2s, tax returns, brokerage statements, or a CPA/attorney letter), entity documents if you are investing through an LLC or trust, your QI engagement letter if you have already engaged one, and the relinquished-property settlement statement (or expected closing date if pre-sale). Your specialist will tell you what is required for the specific offering.