Own a DST or Did a 1031 Exchange? Your Tax Reporting, in Plain English.

Last reviewed: October 2026. This page explains how taxes and reporting work. It isn't a recommendation to buy, sell or hold any investment.

How a DST shows up on your return

A DST is a trust that holds real estate. Under IRS Revenue Ruling 2004-86, owners are generally treated as owning their share of the property directly. In practice that means:

• You usually get a grantor trust statement (not a K-1) with your share of rent, expenses and depreciation. It often arrives in March or later, so an extension is common.
• Your share goes on Schedule E, as if you owned the building yourself.
• If the property sits in a state with an income tax, you may need to file in that state even though you live in Florida.

More detail: What is a DST and how is it taxed?

If you bought in through a 1031 exchange: basis and depreciation

Most DST owners got there by exchanging a rental they sold. The exchange doesn't erase the tax on that sale. It moves it into the DST, and that changes three numbers on your return for years.

Cash you take out of an exchange (often called "boot") is taxable in the year of the exchange. The exchange itself is reported on Form 8824. Keep that form and the exchange closing statements for as long as you own the DST and any property after it. See How a 1031 exchange works.

1031 deadline calculator

For a 1031 exchange you generally have 45 days after the sale closes to identify replacement property, and you must receive it by the earlier of 180 days or your tax return's due date (including extensions). For a sale late in the year, the return due date can arrive first unless you extend.

The ways a DST ends

There's no way to simply ask a DST for your money back. These are the usual endings and what each means for your taxes:

• The sponsor sells the property. This is the normal ending, usually after several years, on the sponsor's timing. Taking the cash makes the deferred gain and recapture taxable that year. Doing another 1031 exchange can keep it deferred, if a qualified intermediary is in place before the sale closes.
• A 721 exchange into a REIT. Some DSTs roll into a REIT's operating partnership. That's generally tax-deferred, but it usually ends future 1031 exchanges, and later cashing out is taxable.
• Holding until death. Heirs generally receive a stepped-up basis. See inherited property and the step-up.
• Selling your interest to another investor. Buyers are few, sponsor approval is usually needed, and it's a taxable sale.
• Gifting it. Allowed by some DSTs. Family members generally take over your basis, and the deferred gain goes with it.
• A forced sale or foreclosure. See below.

Own an Inspired Healthcare Capital DST?

Inspired Healthcare Capital and many affiliated companies filed for Chapter 11 bankruptcy in February 2026 in the U.S. Bankruptcy Court for the Northern District of Texas, and its senior-living properties are being sold through the case. (Public reports as of October 2026. Check the court case and your own notices for the current status.)

What that likely means for your taxes:

• A sale through the bankruptcy is still a sale. If your DST's property is sold in 2026, your share is generally reported on your 2026 return, including depreciation recapture.
• Gain or loss depends on your DST's numbers. Because your basis likely carried over from an earlier exchange, you could report a gain even if little or no cash reaches you. Other owners will have a loss. The final statement and the bankruptcy outcome decide which.
• A new 1031 exchange is unlikely when the court, not the owners, controls the sale and the money.
• Other states may want a return where the property was located, for the year of the sale.
• Any later recovery or settlement has its own tax treatment. Keep every notice and payment record.

We can't advise on the bankruptcy, your claims or any lawsuit. For that, talk to your own attorney. We can help you understand and report what lands on your return. Start your secure DST folder so your statements and notices are in one place when the final numbers arrive.

When the property is sold or lost

• The sale is reported in the year it happens, using the trust's final statement. Wait for it before filing, and plan for an extension.
• Keep every statement from every year you owned the DST, plus your original exchange papers. Your basis depends on them.
• A sale through a sponsor's bankruptcy or a later legal settlement can each have their own reporting. Bring us every notice you receive.
• For questions about the legal side, including claims and the bankruptcy itself, talk to your own attorney. We handle the tax reporting.

Your secure DST folder

Create a private login and your checklist opens with the DST items already selected: each DST's annual statement, your 1031 exchange papers, the depreciation pages from past returns, and any sale or bankruptcy notices. Snap a photo or upload a file from your phone or computer.

Please don't email statements or Social Security numbers. Prefer to talk it through first? Call (727) 300-1676.