What Is a DST (Delaware Statutory Trust), and How Is It Taxed?

Last reviewed: October 2026

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

What you'll receive

Most DSTs send an annual statement (often called a grantor trust letter or operating statement) with your share of income, expenses and depreciation. It may arrive in March or later, so an extension is common.

How it's reported

• Your share of rent and expenses goes on Schedule E.
• You depreciate your share of the building. If you came in through a 1031 exchange, part of your old basis carries over.
• If the property is in a state with an income tax, you may need to file there even though you live in Florida. See What is a K-1? for how out-of-state filing works.

Bought into a DST through a 1031 exchange?

Many people buy DST interests as the replacement property in a 1031 exchange. The IRS treats a properly structured DST interest as an interest in real estate, so it can qualify. That choice affects your basis and depreciation for as long as you own it.

Your basis carries over

• Your starting basis in the DST is generally the adjusted basis of the property you sold (what you paid, plus improvements, minus depreciation already taken).
• Add any extra cash you put in and your share of the DST's loan, if it's more than the debt you paid off on the old property.
• Subtract any cash you took out, which is also taxable that year.
• Because of this, your basis is often much lower than the price you paid for the DST interest. Form 8824 from the exchange year is where this is figured. Keep it.

Depreciation works in two pieces

• Carried-over basis generally keeps depreciating on the old property's schedule, for the years it had left.
• Any extra basis, from new cash or more debt, starts a new schedule, usually 27.5 years for apartments or 39 years for commercial property.
• There's an election to treat everything as newly placed in service instead. It's made on the exchange-year return.
• Only the building part depreciates. The trust's statements usually show the land and building split.

The deferred gain doesn't go away

• The gain and depreciation recapture from your old property ride along into the DST.
• When the DST sells, your share of the sale can bring all of it due at once, unless you exchange again.
• If you inherit a DST interest, the step-up in basis rules generally apply.

Records to keep

• Your old property's purchase, improvement and depreciation records
• Form 8824 and the closing statements from the exchange
• Every annual statement from the DST

When the property is sold or lost

When a DST sells its property, owners report their share of the sale in that year, including depreciation recapture. That's true even if you got little or no cash, because paying off the debt counts as part of the sale price. The same can apply to a foreclosure. Wait for the final statement from the trust before filing, and keep every statement from the years you owned it, since you'll need them to figure your basis.

For questions about a DST's legal situation, talk to your own attorney. We handle the tax reporting.

Official source: IRS Revenue Ruling 2004-86 (DST tax treatment).

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